Good news! You can look forward to somewhat smaller required minimum distributions (RMDs) from your IRA and company retirement savings plan beginning in 2022.

On November 6, 2020, the IRS released new life expectancy tables to calculate RMDs. The RMD is based on the total amount of money in your tax-deferred accounts divided by a factor from the IRS life expectancy tables. The new tables are not effective until 2022. RMDs were waived for 2020, and RMDs for 2021 will be calculated under the current tables.

The IRS revised the current tables to reflect the fact that Americans are now living longer. Last November, the IRS issued proposed regulations that were supposed to go into effect for 2021. The IRS delayed the new tables another year because final regulations were issued so late in 2020 and to give custodians and record keepers enough time to implement them. The last time the IRS revised the tables was in 2002.

The new formula reflects life expectancies that are about one to two years longer than in the existing life expectancy tables, which will reduce the size of your required minimum distribution. 

Remember, you generally had to start taking withdrawals from your IRA, SIMPLE IRA, SEP IRA, or retirement plan account when you reached age 70 ½.  However, changes were made by the Setting Every Community Up for Retirement (SECURE) Act signed into law in December of 2019.  Due to the SECURE Act changes, if your 70th birthday is July 1, 2019 or later, you do not have to take withdrawals until you reach age 72.  Remember, Roth IRAs do not require an RMD until after the death of the account owner.

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