Reform Bill Intensifies Savings Focus

One year, one thousand pages and perhaps a few fistfights later, Congress last week approved the first comprehensive pension legislation in more than 30 years.

While more than half of the Pension Protection Act of 2006 focuses on how companies must handle their pension plans in the future, there's still plenty of alluring stuff for individual 401(k) and IRA savers. And there clearly is a trend here: Congress is further pushing the retirement savings onus onto us. In other words, don't count on the ailing Social Security system.

Truthfully, you shouldn't want the government in charge of investing your old-age money anyway. So empower yourself and take charge of your retirement. Here's how the bill helps you.

So Long, Sunsets

The biggest bonus of this bill is that our current retirement perks are now permanent.

Back in 2001, the Economic Growth and Tax Relief Reconciliation Act allowed for increased IRA contribution limits (up to $5,000 in 2008 and then inflation-adjusted until 2010), additional catch-up contributions for people older than 50 and other benefits to help us better save retirement money.

But according to that 2001 tax act, all that good stuff was scheduled to disappear after 2010 and revert back to the pre-2001 rules. That meant that the annual IRA (including the Roth IRA) contribution limits would fall back to $2,000 and the catch-up contributions would no longer be an option.

Thankfully, the new pension reform act made all the EGTRRA provisions that were scheduled to sunset permanent. That means that after 2010, IRA and Roth IRA contributions will keep increasing based on inflation, and the catch-ups are here to stay.

Another perk came on the 529 college savings plan front. Before this bill, the earnings from those plans were tax-free upon withdrawal for tuition, but only until Dec. 31, 2010. After that, bring on the taxes.