With a major change from the Internal Revenue Service (IRS), seniors can now withdraw less cash from retirement accounts.
Those who need to take a required minimum distribution (RMD) will see their life expectancy rise from 82.4 to 84.6 under the IRS measure.
The Sun reports seniors may be penalized if they do not comply with RMDs, which forces them to withdraw cash from retirement accounts.
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RMD kicks in at age 72 for those born on or after July 1, 1949, or after
You are subject to an excise tax of 50% if you fail to meet your RMD, or if you withdraw insufficient funds – so it is best to avoid this.
To avoid penalties, withdrawals should be made every year after you hit 72.
Roth individual retirement accounts (IRAs) are exempt from RMD requirements.
Roth IRA withdrawals aren’t required until the account owner dies.
For each of your eligible retirement accounts, the IRS determines the RMD by dividing the previous year’s end balance by the “life expectancy factor.”
If you are 75 and have a $200,000 balance, your required minimum distribution would be around $8,130.
If a 75-year-old had that balance, under the previous rules, he or she would have to withdraw about $8,733 since there was a 22.9 life expectancy factor.
This provides seniors the chance to watch their funds grow.
View the full table for the life expectancy factor and age.
In addition, you can find out what you will lose by taking money out of your retirement account early.