Average Retirement Age Increases
The original SECURE Act increased the required beginning date (RBD), or the age at which taxpayers must begin taking distributions from traditional retirement accounts, from age 70.5 to age 72. The successor SECURE Act 2.0 Act 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. Further, the normal retirement age for Social Security has been increased to age 67 for beneficiaries who were born in 1960 or later. This change has been gradually phased in over time, designed to reflect increased life expectancy and maintain the Social Security's solvency. For beneficiaries who were born in 1959, the normal retirement age is 66 and 10 months. For beneficiaries who were born between 1943 and 1954, the NRA is 66. Some proposals have called for continuing to increase what constitutes a "normal" retirement age.
We asked two professors and authors of Tax Facts with opposing political viewpoints to share their opinions about whether the average retirement age should continue to rise.
Below is a summary of the debate that ensued between the two professors.
Their Votes:
Their Reasons:
Byrnes: There's a very good reason why we've elected to increase the normal retirement age over the past decade or so. The reality of the American workforce has simply changed over time. It makes absolute sense that the average retirement age and required distribution periods for retirement accounts themselves should reflect this reality and continue to rise as the workforce changes and evolves.
Bloink: Yes, over time, workforce and job demands have shifted, and that is one reason why the normal retirement age has risen over the past decades. However, that change is now recognized and there's no longer a need to continue raising the normal retirement age.
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Byrnes: American workers today are much more educated than they were 50 years ago--meaning that more and more Americans are working in jobs that simply aren't as strenuous as they once were. Those Americans are able to keep working longer--the need to retire at a relatively young age no longer exists.
Bloink: When we allow taxpayers extra time to keep their retirement funds invested, we're depriving the government of much-needed tax revenue. Retirement accounts weren't intended to shelter those dollars from taxation indefinitely--only to provide an incentive to keep those funds invested until the taxpayer reaches retirement.
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Byrnes: The decline of the employer's role in providing retirement benefits, coupled with employees' increased knowledge that they'll be responsible for funding a larger portion of their retirements, has created the need to work longer. The rules governing retirement accounts have to recognize this fact—and it's not an issue that's going anywhere. When Americans essentially have no choice but to continue working to secure their retirements, we have to recognize that fact and allow them to continue delaying taxation on their retirement benefits.
Bloink: We've increased the required beginning age in recognition of both workforce factors and the fact that taxpayers have a strong incentive to delay claiming Social Security until they reach 70 and can claim the maximum possible benefit. There's no need to continue raising the retirement age beyond what we've already done with respect to the post-SECURE Act changes to the retirement distribution required beginning date. Actual retirement ages for working Americans has stabilized and there's no longer a need to continue raising "retirement age" for tax purposes.