Debate: How Helpful Is Secure 2.0 to Average Investors?

Two professors debate whether the sweeping retirement law goes far enough.

President Joe Biden has signed into law the year-end legislation that will fund the government into 2023. That legislation also contained the Secure 2.0 law — officially, the Setting Every Community Up for Retirement Enhancement 2.0 Act — that achieved wide bipartisan support.

The law contains many retirement-related provisions. First, it will gradually increase the age at which required minimum distributions (RMDs) from traditional retirement accounts must begin from 72 in 2022 to 73 in 2023 and up to age 75 by 2033.

The law also increases the “catch-up contribution” limits from $7,500 in 2023 to $10,000 for taxpayers age 60, 61, 62 or 63 for tax years beginning after 2024 ($5,000 for SIMPLE plans). The law would also adjust the $1,000 catch-up contribution to IRAs for inflation beginning in tax years after 2023. Starting in tax years beginning after 2023, however, all catch-up contributions will be treated as Roth contributions.

We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about the impact of the new SECURE Act 2.0 provisions.

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

Byrnes: These are important changes that will encourage more Americans to proactively save for retirement and the legislation itself is an important bipartisan achievement going into the New Year. We need to be focused on providing the most significant incentives possible and this law takes significant strides toward modifying the law in ways that will incentivize retirement savings regardless of a taxpayer’s income levels.

Bloink: The changes included in this bill can incentivize saving, sure. Unfortunately, the Americans who will benefit the most from these changes are the wealthiest Americans who are already maxing out contributions to tax-preferred savings accounts. This bill allows those Americans to minimize their tax liability even further — reducing tax revenue which, of course, reduces the amount of government funding available for the important programs we should be supporting.

Byrnes: Changes like allowing employers to provide a small incentive for workers to save, allowing emergency withdrawals under certain circumstances and even delaying the RMD beginning date will all make these qualified retirement plans much more attractive for average workers. Yes, wealthy Americans will also be entitled to reap the same benefits as any other worker. That doesn’t make this law or its accomplishments any less valuable.

Bloink: This law makes a good start, but we can do better when it comes to providing retirement savings incentives to lower income Americans without unfairly giving wealthy taxpayers yet another way to circumvent paying their fair share of taxes. Some of the provisions in the new law should have come with the same types of income restrictions that we currently use in many other areas, including Roth savings. Without them, we’re providing yet another tax savings benefit to the top earners who need these benefits the most.

Byrnes: This is a law that managed to achieve a level of bipartisan support that is often difficult to achieve. Limiting the benefits of the new retirement provisions to only lower income taxpayers would have undoubtedly made the law much more difficult to pass — meaning that we would not be providing significant benefits to any American. As it stands, we should be encouraging every American to maximize the value of tax-preferred retirement savings accounts, regardless of income level, and that’s exactly what this law achieves.

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