In November 2020, the IRS released new proposed life expectancy tables for calculating required minimum distributions (RMDs) from IRA and employer retirement plans. After more than a year of waiting, the finalized tables will occasionally go into effect on January 1, 2022 and will have far-reaching impacts.
Every individual subject to annual RMDs will be affected. Whether someone is taking lifetime RMDs from his own IRA or taking RMDs on an inherited account, the RMD calculation will change. While most custodians will automatically implement the new tables and make the necessary adjustments internally, it is important for IRA owners and plan participants to understand the mechanics of these changes. After all, while a custodian may calculate an RMD, that custodian is not required to calculate the RMD correctly. Ultimately, it is the responsibility of the account owner to take the proper RMD amount.
All three RMD life expectancy tables were revised:
- Uniform Lifetime Table: Used to calculate lifetime RMDs for an account owner’s own IRA or retirement plan.
- Joint (and Last Survivor) Life Expectancy Table: Used instead of the Uniform Lifetime Table when a spouse is the sole IRA or plan beneficiary, and that spouse is more than 10 years younger than the IRA owner or plan participant.
- Single Life Expectancy Table: Under the SECURE Act, only used to calculate post-death RMDs for “eligible designated beneficiaries” (i.e., surviving spouse; minor child of the account owner/participant; chronically ill or disabled individual; those beneficiaries who are not more than 10 years younger than the owner/ participant).
Whether an infant or elderly, the new IRS life expectancy tables will impact many individuals. The typical result will be somewhat smaller RMDs. Granted, we are not talking about wild swings in RMD amounts or substantially elongated life expectancies. But we are talking about nuanced changes that reflect a population that is living longer. While the new tables will not have a significant or immediate impact on all retirement account owners, they will touch most of us at some point. As such, it is important to
understand the changes and how they are implemented.
Copyright © 2021, Ed Slott and Company, LLC Reprinted with permission Ed Slott and Company, LLC takes no responsibility for the current accuracy of this information.
Advisory services offered through CreativeOne Wealth, LLC a Registered Investment Adviser. CreativeOne Wealth, LLC and Oliver Asset Management are unaffiliated entities.
Licensed Insurance Professional. Respond and learn how financial products, including life insurance and annuities can be used in various planning strategies for retirement. The information contained herein is based on our understanding of current tax law. The tax and legislative information may be subject to change and different interpretations. We recommend that you seek professional tax advice for applicability to your personal situation.
*Testimonials are based on unique experiences from current clients and are not representative of all client experiences. Testimonials are unsolicited and clients received no compensation (cash or non-cash). Past performance is no guarantee of future results. Testimonials are encouraged and welcomed from all prospects and clients. Investment advisory services offered through CreativeOne Wealth, LLC, a registered investment advisor. CreativeOne Wealth is not affiliated with Oliver Asset Management. Additional information about CreativeOne Wealth, LLC is available in its current disclosure documents, Form ADV, Form ADV Part 2A Brochure, and Client Relationship Summary report which are accessible online via the SEC’s Investment Adviser Public Disclosure (IAPD) database at www.adviserinfo.sec.gov, using CRD #281213.
Oliver Asset Management © 2023