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IRS Issues New RMD Tables - For 2022

IRS Issues New RMD Tables - For 2022

By Ian Berger, JD - IRA Analyst

November 2020

Good news! You can look forward to somewhat smaller required minimum distributions (RMDs) from your IRA and company retirement savings plan beginning in 2022. That’s because, on November 6, the IRS released new life expectancy tables that are used to calculate RMDs. The new tables are not effective until 2022. RMDs are waived for 2020, and RMDs for 2021 will be calculated under the current tables.

The IRS revised the current tables, which have been in effect since 2002, to reflect the fact that Americans are now living longer. Last November, the IRS issued proposed regulations that were supposed to go into effect for 2021. However, because the final regulations were issued so late in 2020, the IRS delayed the new tables another year to give custodians and record keepers enough time to implement them.

There are three life expectancy tables used for RMDs: the Uniform Lifetime Table, the Joint and Last Survivor Table, and the Single Life Table.

•  Uniform Lifetime Table: Used to calculate lifetime RMDs. If you turn age 70 ½ after 2019, yourRMDs generally must begin after age 72.

•  Joint and Last Survivor Table: Used instead of the Uniform Lifetime Table when your spouse isthe sole beneficiary and is more than 10 years younger than you.

•  Single Life Table: Used to calculate RMDs for your beneficiaries, but only if they are an “eligibledesignated beneficiary.” These include: a surviving spouse; a minor child; a chronically illindividual; disabled individual; or someone no more than 10 years younger than you. All otherindividual beneficiaries who inherit after 2019 are subject to a 10-year payout rule and do not usethis table. This table is also used if you die after your “required beginning date” (April 1 after yourage 72 year) without naming a living beneficiary. The IRS regulations include a special “reset”provision for calculating RMDs for non-spouse beneficiaries who inherit before January 1, 2022.

Here’s an example of the effect of the new tables:

IRA owner Sofia reaches age 72 in 2022 and decides to take her first RMD in 2022. (She could have deferred her first RMD until April 1, 2023, but that would require her to receive two RMDs in 2023 – the 2022 RMD and the 2023 RMD.) Sofia’s IRA was worth $300,000 as of December 31, 2021.

Under the old Uniform Lifetime Table, Sofia’s life expectancy factor would have been 25.6, and her 2022 RMD would have been $11,719 ($300,000/25.6).

Under the new table, her life expectancy factor is 27.4, and her RMD is $10,949 ($300,000/27.4).

That’s a 7% drop. A smaller RMD means less taxes and more retirement savings you can retain for tax-deferred growth. Of course, you can always take more than your RMD if you wish. Failing to take your full RMD can result in a penalty equal to 50% of the amount not taken.

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Although this information may not apply to you, please consider sharing it with someone who could take advantage of this opportunity. New legislation and volatile markets coupled with these uncertain times may be causing confusion. We are here to help guide you and anyone you care about. If they are important to you, they are important to us!

Copyright © November 9, 2020, Ed Slott and Company, LLC. Reprinted from Ed Slott and Company's Monthly IRA Updates with permission. Ed Slott and Company, LLC takes no responsibility for the current accuracy of this information.

Withdrawals of non-RMD funds are bound by the one-rollover-per-year rule and the standard 60-day rollover rule.

This information, developed by an independent third party, has been obtained from sources considered to be reliable, but Raymond James Financial Services, Inc. does not guarantee that the foregoing material is accurate or complete. Changes in tax laws or regulations may occur at any time and could substantially impact your situation.

Raymond James is not affiliated with and does not endorse the opinions or services of Ed Slott or Ed Slott and Company, LLC.

RJFS Financial Advisors do not provide tax or estate planning services. You should discuss any tax or legal matters with the appropriate professional.