IRS updates life expectancy tables that determine RMDs

Updated March 27, 2023

If you’ve been saving for retirement, then you likely are as jazzed as I am about a provision of the Setting Every Community Up for Retirement Enhancement Act of 2019, or SECURE Act.

This law, which took effect this year, gives all us owners of tax-deferred retirement savings accounts an extra year and a half before we must start taking out some of the money. These withdrawals, known as required minimum distributions (RMDs) now can wait until we turn 72.

Pushing the RMD age from 70½ to 72 means that the money in our traditional IRAs and/or workplace plans like basic 401(k)s have more time to grow untouched.

As a corollary to that law change, the IRS has just updated the tables that help us compute just how much of our tax-deferred retirement money we must take out — and finally pay tax on — when we now hit 72.

UPDATE: The retirement law has changed again. The Setting Every Community Up for Retirement Enhancement (SECURE) Act 2.0, which was enacted Dec. 29, 2022, as part of the Consolidated Appropriations Act, 2023, increased the RMD starting age to 73 beginning in 2023. It will increase to age 75 beginning in 2033.

New life-span withdrawal tables: Technically, the table updates were done under an earlier executive order asking the Treasury to update the tables to reflect current mortality data and increase the effectiveness of tax-favored retirement programs.

Regardless of the motivation, the changes to the RMD law and the new withdrawal tables effectively mean that all us tax-deferred retirement account owners now will be able to keep more in our plans to account for the possibility (hope!) that we likely will live longer.

There are three life expectancy tables you can use to calculate your RMD based on your situation. They are:

1. Joint and Last Survivor Table – use this if the sole beneficiary of the account is your spouse and your spouse is more than 10 years younger than you
2. Uniform Lifetime Table – use this if your spouse is not your sole beneficiary or your spouse is not more than 10 years younger. This is the most-commonly used table.
3. Single Life Expectancy Table – use this if you are a beneficiary of an account (an inherited IRA)

These three updated RMD calculation tables will be published in the Federal Register on Thursday, Nov. 12. They eventually also will be printed in Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs), when they take effect for the 2022 tax year.

Uniform RMD table: Since the table that’s used by most is the Uniform Lifetime Table, I’ve reproduced it below. Again, if you (like retirement anticipating me) have looked at this table before, you’ll note that ages 70 and 71 are gone, since the SECURE Act has changed the RMD age to 72.

When you do face an RMD, you take each account’s value on the prior Dec. 31 (your plan’s or plans’ annual statement(s) should show this) and divide that/those amount(s) by the IRS’ life expectancy

Using the updated table above, 75-year-old Janet Retiree, whose spouse is her age and who has a traditional IRA worth $100,000 at the end of the year, will have to take at least $4,065 from her account. That’s the result of her $100,000 IRA value divided by 24.6 years.

Again, if you will use one of the other RMD life expectancy tables to calculate your withdrawal amount, they are in the Treasury release.

No 2020 RMDs: Finally, remember that you don’t have to worry about any of these tables this year. That’s because you don’t have to worry, regardless of your age, about taking an RMD in 2020.

The Coronavirus Aid, Relief and Economic Security (CARES) Act that created the first (and so far only) COVID-19 economic relief payments back in March also waived RMD requirements for 2020.

The move was made to provide a little relief to tax-deferred retirement account owns who watch their nest eggs plummet when the coronavirus pandemic hit the United States in full force. By letting folks leave their retirement accounts alone, they got more time for their market-battered retirement accounts to rebound.

When 2021 rolls around, RMDs will resume using the existing tables. But come 2022, these new withdrawal tables will provide your affected accounts even more time to grow as you age and use the money to really enjoy your Golden Years.

This post has been corrected to note that the new life expectancy tables are effective not for 2021 RMDs, but for required withdrawals starting in 2022.

You also might find these items of interest:

• 7 tax breaks for older taxpayers
• Retirement plan inflation adjustments for 2021
• Social Security recipients to get bigger benefits in 2021, but some retiree money could be taxable

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