Debate: Should RMDs Begin at Age 75 Instead of 72?

Two professors share their opinions about one of the major changes proposed in Secure Act 2.0.

The Securing a Strong Retirement Act — the bill dubbed “Secure Act 2.0″ that resoundingly passed the House on March 29 — would push the required beginning date for retirement account distributions from age 72 to age 75.

Once taxpayers reach the required beginning date, they must begin taking annual withdrawals known as required minimum distributions from retirement savings accounts funded with pretax dollars (including IRAs and 401(k)s).

The original Secure Act raised the required beginning date from age 70½ to age 72 for tax years beginning in 2020 and thereafter. The legislation is not yet scheduled for a Senate vote, and many expect the Senate will introduce its own version of the “Secure Act 2.0” before any agreement is reached on a final law.

We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about raising the RMD age to 75.

Below is a summary of the debate that ensued between the two professors.

Their Votes:

Byrnes

Bloink

Their Reasons:

Byrnes: Taxpayers are living longer and should be able to reap the benefits of allowing their retirement funds to grow tax-deferred for a long period of time. This proposal will allow taxpayers to build larger IRA balances and is just good sense now that more older Americans continue to work past the current RMD age. 

Bloink: All this proposal would do is provide yet another tax benefit to the wealthy. Let’s face it. Most ordinary Americans need to access their retirement savings as soon as they enter retirement — often even earlier than the required beginning date of age 72. The only Americans who would benefit from this pushback are those that simply don’t need the money — meaning the wealthiest Americans who don’t live off their retirement savings during retirement.

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Byrnes: There’s no reason older Americans should be punished just because they reach age 72. Whatever age we pick is going to be arbitrary because every taxpayer’s situation is different. If we want to incentivize retirement savings, we should allow taxpayers to defer RMDs for longer into the future — and certainly to an age where they’re likely to have stopped working.

Bloink: At this point in time, there’s very little benefit to making this change. It’s also one that could be used to hold up passage of the larger retirement package with valuable new provisions in the Senate. If we raise the RMD age again, wealthy taxpayers will simply get another three years of tax-free growth on their account balances, which are likely some of the largest retirement accounts out there. We’ve only just adjusted the RMD age upward to 72. There’s no reason to change the rules yet again.

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Byrnes: Taxpayers should be entitled to do whatever they want with their hard-earned retirement funds. Politics aside, wealthy taxpayers aren’t going to derive any significant benefit from another three years of tax-deferred growth. This change is one that’s been floated many times in the past and gained widespread support.

Bloink: The current legislation that’s passed in the House uses a sneaky trick to get this RMD increase through. It counts the tax dollars received on current Roth conversions to try to get this bill passed without significantly adding to the deficit within the 10-year budget window. If the bill reaches the Senate in its current form, Senators are going to jump all over that and argue that the provision, in reality, would result in a significant revenue loss over the short term — making it that much more difficult to pass the overall retirement bill.

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