Push Back your RMDs Pros and Cons

Pushing back the RBD for RMDs to age 75, as proposed in the SECURE Act 2.0, would have a few potential impacts on retirement savingsSee the pros and cons of pushing back the RBD based off the new SECURE Act 2.0...
January 16, 2023

Push back your rmds pros

and cons

Pushing back the RBD for RMDs to age 75, as proposed in the SECURE Act 2.0, would have a few potential impacts on retirement savings.

One potential benefit of pushing back the RBD for RMDs is that it would allow individuals to save more for retirement. By postponing the age at which individuals are required to start taking RMDs from their retirement accounts, the money in those accounts would have more time to grow. This could be especially beneficial for those who are still working and earning income at age 72 and older, and who want to continue contributing to their retirement accounts.

Another potential benefit of this change would be that it may increase the chances of retirees having more savings and fewer chances of outliving their savings, allowing them to enjoy their retirement with more peace of mind.

On the other hand, pushing back the RBD for RMDs to age 75 could also have some negative impacts. One of them is the potential increase of RMDs. Since the money in the account would be there longer, it would be subject to larger RMDs when retirees finally start taking them. This could be an issue for some people if they can’t handle the bigger withdrawals from their accounts. Additionally, the longer people wait to start taking RMDs, the larger the tax bill is likely to be when they do start taking them.

Some might suggest that this change will benefit the Federal Government by increasing the potential tax receipts. By postponing the age at which individuals are required to start taking RMDs from their retirement accounts, the money in those accounts would have more time to grow. As a result, when individuals do start taking RMDs at a later age, the distributions would likely be larger and therefore subject to more taxes. This would increase the amount of tax revenue that the government would receive. Additionally, with the RBD date set to 75, the government will see an increase in tax receipts because people will start paying taxes on their withdrawals at a later age, which will result in more taxes paid.

However, it’s important to note that the overall impact on tax revenue would also depend on other factors, such as the overall health of the economy, personal income tax rates, and the number of people affected by the RBD change. Additionally, some argue that having more savings and investments during retirement years will increase the economic growth in a society, as well as also decreasing reliance on Social Security and other welfare programs. Therefore, the net effect on tax revenue from the RBD change might be hard to predict.

Finally, some people might have a tendency to let their retirement savings grow larger than they actually need to live on, so when RBD starts at 75, it might be too late to make changes to their savings. Also, people might pass away before they can enjoy the benefit of their savings because they waited so long.

Overall, pushing back the RBD for RMDs to age 75 would have some potential benefits, such as allowing individuals to save more for retirement and reducing the chances of outliving savings. However, it’s also important to consider the potential negative impacts of larger RMDs and a bigger tax bill in the long run. It’s important to consult with a financial advisor before making any changes to your retirement savings plan.