IRS Changes Life Expectancy Table, Adjusts Mandatory Withdrawals for Retirees

Rachel Curry - Author
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Mar. 10 2022, Published 12:05 p.m. ET

Tax-advantaged retirement accounts let you save for your later years with a limited tax penalty. The IRS requires people to start taking mandatory withdrawals at a certain age, which they base on life expectancy. This year, new life expectancy tables are going into effect and the IRS is changing mandatory withdrawals.

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Here’s what to know about your RMDs (required minimum distributions), or mandatory withdrawals, from your retirement accounts.

The IRS provides new life expectancy tables for 2022.

The IRS laid out new life expectancy tables this year that suggest people are living about 1–2 years longer.

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There are two tables, one for living retirees and one for post-death distribution calculations. Each of these got a boost.

How do changes to life expectancy impact RMDs?

RMDs are mandatory withdrawals that people over a certain age must do each year from their retirement accounts. Retirement accounts include 401(k) plans, certain types of IRAs, and other retirement plans.

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RMDs were waived in 2020 due to the economic impact of the COVID-19 pandemic. They resumed in 2021, with anyone who turned 70 on July 1, 2019, or later not having to take RMDs until age 72. Now, they’re changing in 2022 due to the new life expectancy tables that suggest people live longer, which could reduce RMDs for individuals.

Finding out how much your mandatory withdrawals are is advisable.

Visit the IRS table and note your age, your life expectancy factor, and your retirement account balance. You will need to do this for each account that requires minimum distributions, depending on whether it’s an account for a living retiree or a beneficiary-led account for a post-death individual.

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For example, if you are 75 years old, your new life expectancy factor is 24.6. If you have $600,000 in your retirement account, you’ll do the following equation:

$600,000 / 24.6 = $24,390.24

With this equation, you are required to withdraw at least $24,390.24 this year.

Let’s take a look at a post-death example. If you’re a beneficiary managing a Roth IRA account for a deceased person, you’ll need to note your own age, life expectancy factor, and account balance.

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Say you’re 45 years old. According to the new IRS tables, your life expectancy factor is 41. If you have $1,000,000 in your retirement account, you’ll do the following equation:

$1,200,000 / 41 = $29,268.29

With this equation, you are required to withdraw at least $29,268.29 this year.

What if this is your first year of making a required retirement withdrawal?

If you haven’t made an RMD before, there’s a key caveat you should be aware of. First-time minimum withdrawals can be delayed until April 1 of the following year. If you decide to delay your first RMD, you will have two RMD withdrawals to do in a single year.

The IRS imposes required minimum distributions on tax-advantaged accounts largely as a way to collect taxes. You will need to pay taxes on your withdrawals, which differ depending on the type of account.

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