For the first time in nearly 20 years, the IRS has released updated actuarial or "life expectancy" tables. Those of you who take required minimum distributions (RMDs) from retirement accounts may already know how to use them. Using these new tables is relatively simple, but here are some considerations to keep in mind.
What’s my RMD?
The amount you must withdraw annually is calculated by dividing the previous year-end balance (as of 12/31) of your qualifying accounts by what the IRS calls a “Distribution Period" factor, widely presumed to be your actuarial life expectancy, based on your age at year-end. The new tables assume we’ll live longer, despite the potential effect of the corona viruses, which should reduce the amount you must withdraw in 2022.
Where do I find the applicable table?
The current tables for required withdrawals will be in the updated IRS Publication 590-B. That which most of us will use is Table III. Those with spouses 10 years younger or married with a non-spouse beneficiary will use an alternate table.
Here is Table III for 2022:
What about inherited accounts?
There are some exceptions, but you must generally withdraw all assets within ten years, regardless of your life expectancy. The Secure Act eliminated the ability to “stretch” your withdrawals across your lifetime if the original account owner passed away in 2020 or later.
While most RMD calculations are straightforward, the process can get complicated if you have multiple accounts or other sources of retirement income. Before modifying your current strategy, feel free to reach out so we can help you review your situation. The penalty for under-withdrawing is severe.