Requirements for Retirement Plan Withdrawals Could Change Due to New IRS Life Expectancy Tables

IRAs, 401(k)s, and other retirement plans will be affected by new life expectancy tables that go into force this year, so you’ll need to keep an eye on your withdrawals.

Because of the COVID-19 epidemic, RMDs were temporarily suspended for 2020, but they were reinstated last year along with a revision to the eligibility age limit, as previously reported by GOBankingRates.


The new life expectancy statistics could make things even more confusing this year.

Ed Slott, a CPA and founder of Ed Slott & Co., told CNBC that “there are a few tough circumstances that will only happen this year.” Begin taking distributions from an IRA, SIMPLE IRA, SEP IRA, or retirement plan when they turn 7012, the IRS advises.

However, if your 70th birthday occurs on or after July 1, 2019, you won’t have to begin withdrawals until you’re 72 because of amendments enacted by the SECURE Act of 2019. Roth IRAs don’t need distributions until after the owner’s death.

RMDs begin at age 7012 if you achieve that age before 2020. When it comes to mandatory withdrawals, if you turn 7012 in 2020 or later, you won’t have to do so until you’re at least 72.

A “life expectancy factor” as specified by the Internal Revenue Service (IRS) is used to calculate the annual minimum withdrawal requirement. Your withdrawal amount may be reduced because of the agency’s updated tables that presume a longer lifespan.

Using the revised tables “gives you around one to two years more in life expectancy,” Slott stated.

CNBC cited this example: A 75-year-old would be assigned a factor of 24.6 under the new uniform life table. Divide $500,000 by 24.6, and you get roughly $20,325 in RMDs for a $500,000 account balance. It was $21,834 for a $500,000 account for a 75-year-old under the old table.

In the first year of RMDs, you can delay the mandatory withdrawal until April 1 of the following year, meaning you would have two RMDs in one year. This is crucial to remember! Please ensure that you utilize the correct account balances and life expectancy figures if you postpone taking your 2021 RMD in order to take advantage of the new rule.

To calculate the required minimum distribution (RMD) for 2021, we’ll use the previous life expectancy estimates and the account balance as of December 31, 2020. In order to calculate a 2022 RMD, the revised tables and the final balance at the end of 2021 would be used.

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