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New IRS Life Expectancy Tables Mean Lower RMDs in 2022

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What You Need to Know

  • The tables haven't been updated in 20 years.
  • The life expectancy at age zero is now 84.6 years, up from 82.4 years.
  • The updated tables don't account for a recent decline in life expectancy due to the pandemic and other factors.

Required minimum distributions will be smaller starting in 2022 as updated Internal Revenue Service life expectancy tables go into effect.

“It’s been 20 years since the IRS last updated these tables,” writes Natalie Choate, an attorney in Wellesley, Massachusetts, “so some advisors may have forgotten that such a change was even possible.”

The new tables can be found at the end of IRS Bulletin 2020-49, published in November 2020, according to Choate, who explained the changes in a recent Morningstar column, “New Year, New IRS Life Expectancy Tables.”

As Choate writes, the life expectancy has increased in these tables. For example, the new table has a life expectancy at age zero of 84.6 years, versus 82.4 years in the old table. This means that RMDs are slightly lower since IRA withdrawals are expected to be spread out over a longer lifetime.

As Sarah Brenner, director of retirement education at Ed Slott & Co., states in the company’s newsletter: “The new tables can be used by anyone who is taking RMDs, even those who inherited an account a long time ago or those way beyond their RMD required beginning date. One exception is for those who reached 72 in 2021 and decided to delay their first RMD into 2022 (before April 1, 2022). Those individuals need to use the old tables to calculate that delayed 2021 RMD even though they can take it in 2022.”

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How the Tables Will Change RMDs

There are three tables. One is for singles. The second, the uniform lifetime table, applies for lifetime distributions to an employee in situations in which the employee’s surviving spouse is not the sole designated beneficiary. This table is also used if the employee’s surviving spouse is the sole designated beneficiary but is not more than 10 years younger than the employee. The third, the joint and last survivor table, is used for determining the joint and last survivor life expectancy of two individuals. Mortality rates are also provided.

Choate provides several examples of how the new tables will change RMDs. For instance, if Glenda is turning 77 in 2022, going through the process to determine her RMD on a $1 million IRA, and assuming her designated beneficiary is not her spouse who is 10 years younger, she would divide the applicable factor from the uniform lifetime table, which is 22.9. Thus, her 2022 RMD is $43,668.12. The old tables had her RMD at $47,169.81. Her reduction: $3,500.

Choate does note that the increase in life expectancy has a certain amount of “irony” —”These new tables, designed to reflect longer life expectancies, come just as America experiences a downtick in life expectancies due to the coronavirus and its reverberations.”

But that factor may not play out in new tables soon. These IRS tables are not updated often, and in fact, the Treasury Department and the IRS asked for feedback on how often they should be updated and they “currently anticipate that they will review the tables at the earlier of: (1) 10 years or (2) whenever a new study of individual annuity mortality experience is published,” according to the IRS bulletin.