Debate: Who Benefits From Secure 2.0's Increased RMD Age?

Our Tax Facts experts debate whether Americans will fully understand the pros and cons of delaying RMDs.

With the passage of the Setting Every Community Up for Retirement Enhancement (Secure) Act In 2019, Congress increased the date at which taxpayers must begin taking minimum distributions from traditional retirement accounts from 70.5 to 72. Late in 2022, Congress passed the successor version, known as the Secure 2.0 Act.

Secure 2.0 will gradually increase the age at which required minimum distributions (RMDs) from traditional retirement accounts begin from 72 in 2022 to 73 in 2023. For 2033 and thereafter, the age will increase from 73 to 75.

We asked professors Robert Bloink and William Byrnes, authors of ALM’s Tax Facts with opposing political viewpoints, to share their opinions on Congress’ decision to once again raise the required beginning date for retirement plan distributions.

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

Their Votes:

Byrnes
Bloink

Their Reasons:

Byrnes: Americans are living longer than ever before — and they’re also working longer than ever before. Raising the age at which RMDs must begin reflects the reality of retirement in our nation. Taxpayers should have the freedom to choose to leave their hard-earned retirement funds in their accounts while they continue working, so they aren’t burdened with additional taxable income for retirement withdrawals if they haven’t actually retired yet and are still paying taxes at the same rates as during earning years.

Bloink: Raising the required beginning date really only benefits the super-wealthy Americans who can afford to leave their retirement funds in place for an additional three years. It also gives ordinary Americans the idea that it’s always best to defer retirement withdrawals in all situations.

The amount of any given retirement account owner’s RMD is based on the account value at the end of the prior year and the taxpayer’s age. That means taxpayers who delay RMDs simply because they can will be forced to take larger distributions once they are forced to start withdrawing.

Byrnes: All this new provision does is give taxpayers the flexibility to determine when to begin withdrawing from the account. No one is saying that taxpayers won’t be able to withdraw their retirement money at age 70.5 if that’s their choice. Every taxpayer’s situation is different, and each person should be entitled to make their own decision when it comes time to start taking RMDs.

Bloink: Taxpayers need to be aware that, in reality, leaving retirement funds in the account for a few extra years can create tax problems down the line. Not only will future withdrawals need to be larger (therefore creating additional tax liability), but it could create tax headaches for beneficiaries who are now subject to a 10-year withdrawal period in most cases.

Byrnes: Yes, increasing the required minimum distribution start date theoretically gives these account values additional time to grow, which can benefit the wealthy and generate larger future distributions. On the other hand, we know that many people have seen their account balances decrease in today’s rocky market. Allowing them to keep that money in the account for extra time can give the balances time to recover so that taxpayers aren’t forced to lock in losses because of the RMD rules.

Bloink: Most people don’t withdraw the minimum required from their accounts. We’re talking about seniors who need their retirement savings to cover basic living expenses. So this new provision is not going to add significant flexibility for the vast majority of Americans. What it will do is give the very wealthy added flexibility. Even if a taxpayer can afford to wait, they must be reminded that a larger future distribution can push them into a higher tax bracket, which could mean higher taxes on Social Security benefits and even potentially higher Medicare premiums.

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