Every little bit helps, especially in the worst inflationary period in 40 years. But for people who have to take Required Minimum Distributions (RMD) from Traditional IRAs, Inherited IRAs, and Retirement Plans, there’s good news. Beginning in 2022, the amount you’re required to withdraw goes down meaning your tax bill on those distributions goes down, too.
People are living longer, so the IRS has updated its life expectancy tables. Under the old tables, a person was expected to live 82.4 years. Now, after the first IRS update to the tables in 20 years, the age has been increased to 84.6 years.
Calculating your RMD remains the same. You apply the IRS factor for your age to the balance of your IRA on December 31st of the previous year and that gives you your current Required Minimum Distribution.
If you want to see the new life expectancy tables, it may be a little difficult. The IRS says you can find them in IRS Publication 590-B. Good luck. Besides, 590-B is only a draft document right now.
You’ll have a better chance of finding the new tables in Internal Revenue Bulletin 2020-49, which announced the updated tables, but you have to scroll way down in this massive document to section 1.401(a)(9)-9.
The easiest way to get an idea of what your RMD will be for 2022 is using a calculator created by the U.S. Securities and Exchange Commission. The calculator has been updated with the new life expectancy tables. You can find the calculator at investor.gov.
So, whether you’re 72 and required to take an RMD for the first time, you’re already taking RMDs, or you have to take distributions from an Inherited IRA or retirement plan, those RMDs are now spread over a longer period of time and Uncle Sam’s hand won’t go quite as deep into your pocket.