New RMD tables published

[bada bing]

The Federal Register released the new RMD tables to take effect in 2022. Basically it pushes the same divisors back from 70.5 to 72. Every little bit helps
https://public-inspection.federalregister.gov/2020-24723.pdf

 

[gcgang]

The Federal Register released the new RMD tables to take effect in 2022. Basically it pushes the same divisors back from 70.5 to 72. Every little bit helps
https://public-inspection.federalregister.gov/2020-24723.pdf

99 pages of Gubment jargon sends me into a coma.

Isn’t it still about 4-5% until you get over 80?

 

[audreyh1]

Yes. 3.65% at 72 to 4.96% at 80. https://www.kitces.com/current-vs-new-uniform-lifetime-table-rmd-as-a-percentage-of-account-balance/

 

[Koolau]

Yes. 3.65% at 72 to 4.96% at 80. https://www.kitces.com/current-vs-new-uniform-lifetime-table-rmd-as-a-percentage-of-account-balance/

Looks like I'm way ahead of the game. I've been taking about 5% as that's about what I need. I don't want to take from Roths or other instruments. YMMV

 

[Golden sunsets]

Do any of you folks know what happens to those who are already withdrawing based on the old schedule and are already older than 72? IOW will the factor change for 2022 from the old schedule to the new schedule and continue with the new schedule for all years thereafter?

 

[Car-Guy]

My RMD's will be starting soon. Thanks for the info.. I'll rerun my numbers to see if my earlier withdrawals will still be enough to keep me under the IRMAA limits after 72.

 

[cathy63]

Do any of you folks know what happens to those who are already withdrawing based on the old schedule and are already older than 72? IOW will the factor change for 2022 from the old schedule to the new schedule and continue with the new schedule for all years thereafter?

Everyone will use the new tables beginning in 2022, regardless of what they've done in the past.

As a result, there are some cases where the fraction of the account that must be withdrawn in 2022 will be less than the fraction for 2021.

 

[Golden sunsets]

Everyone will use the new tables beginning in 2022, regardless of what they've done in the past.

As a result, there are some cases where the fraction of the account that must be withdrawn in 2022 will be less than the fraction for 2021.

Great to know. I substituted the new factors and our taxes will reduce by several thousand dollars. Yay!

 

[Another Reader]

Everyone will use the new tables beginning in 2022, regardless of what they've done in the past.

As a result, there are some cases where the fraction of the account that must be withdrawn in 2022 will be less than the fraction for 2021.

Will that apply to inherited IRA's?

 

[SecondCor521]

Will that apply to inherited IRA's?

For 2021, you'll still do things the old way and subtract 1 from whatever divisor you used in 2020.

For 2022, you'll switch over the new tables, but you have to look up what the initial divisor would be under the new tables and then subtract 1 for however many years it's been since then, and that would be your new divisor.

So if, for example, you inherited an IRA in 2015 and your first year's withdrawal was in 2016 when you were age 37, you'd go to the new table, find the new divisor for age 37, discover it to be 48.6. You'd then figure out that 2022 is six years after 2016, subtract 6 from 48.6, and arrive at a divisor of 42.6 for 2022.

It'd then be 41.6 in 2023, etc.

Kitces describes this process better in a blog post here: https://www.kitces.com/blog/irs-proposes-new-rmd-life-expectancy-tables-to-begin-in-2021/

The regulations in the OP seem to follow this process as well. See page 16 of that PDF where it talks about the transitional rule applied to a non-spouse beneficiary.

 

[Crabby Mike]

The Federal Register released the new RMD tables to take effect in 2022. Basically it pushes the same divisors back from 70.5 to 72. Every little bit helps
https://public-inspection.federalregister.gov/2020-24723.pdf

I'm not at my laptop where I could review this better, but I doubt the "push the divisors back" description. Life expectancy at 72 doesn't magically become what it was at 70. Rather, I assume what they did was simply revise the expectancies across all ages to reflect new data. Please correct me if I'm wrong!

 

[SecondCor521]

I'm not at my laptop where I could review this better, but I doubt the "push the divisors back" description. Life expectancy at 72 doesn't magically become what it was at 70. Rather, I assume what they did was simply revise the expectancies across all ages to reflect new data. Please correct me if I'm wrong!

No, you're correct and OP's explanation isn't. They recalculated the divisors based on improved life expectancies. It may be that this recalculation and pushing back the divisors give similar results, but IIRC they're not identical.

 

[cathy63]

Will that apply to inherited IRA's?

It depends on who you inherited from and when. If you inherited in 2020 or 2021, then you are subject to the rules in the SECURE Act, which did away with most stretch IRAs. If you have an older inherited IRA, or if you qualify for one of the exceptions in the SECURE Act, then you will use the new tables in your calculations.

 

[Gumby]

No, you're correct and OP's explanation isn't. They recalculated the divisors based on improved life expectancies. It may be that this recalculation and pushing back the divisors give similar results, but IIRC they're not identical.

I just compared the old and new divisors from ages 70-82. While they are very close to what you would get if you simply pushed the old table back two years, they are indeed not identical.

 

[RetireeRobert]

The Federal Register released the new RMD tables to take effect in 2022. Basically it pushes the same divisors back from 70.5 to 72. Every little bit helps
https://public-inspection.federalregister.gov/2020-24723.pdf

Good deal. I have been forced to take my otherwise unneeded RMD's each year, and thereby have been forced to pay higher taxes on my SS. So every little bit helps with the RMDs. At least they gave us a break for 2020 on waiving RMD for that year.

 

[myself]

It depends on who you inherited from and when. If you inherited in 2020 or 2021, then you are subject to the rules in the SECURE Act, which did away with most stretch IRAs. If you have an older inherited IRA, or if you qualify for one of the exceptions in the SECURE Act, then you will use the new tables in your calculations.

Prior to the SECURE ACT, you didn't have to draw down the inherited IRA in 10 years. If the person passed away after the SECURE ACT, you have to cash it out in full and pay any taxes within 10 years.

 

[myself]

Will that apply to inherited IRA's?

ONLY if they were inherited prior to the SECURE Act.

 

[cathy63]

ONLY if they were inherited prior to the SECURE Act.

The SECURE Act has exceptions to the 10 year rule. If you qualify for one of the exceptions then you will still use the new RMD table starting in 2022.

 

[Perryinva]

The waiving for 2020 was key for me as inherited IRA RMD would have triggered IRMAA, so after taxes are filed, we get back whatever IRMAA increase was triggered for 2021. It won’t trigger now from 2020 on and normal withdrawals will cover RMDs once Roth conversions are completed.

 

[Golden sunsets]

The waiving for 2020 was key for me as inherited IRA RMD would have triggered IRMAA, so after taxes are filed, we get back whatever IRMAA increase was triggered for 2021. It won’t trigger now from 2020 on and normal withdrawals will cover RMDs once Roth conversions are completed.

Are you sure about that? We are paying IRMAA, 2 tiers in this year, based on 2019 earnings, which jumped due to 2 RMDs. We didn't take RMD's in 2020, so there will be no IRMAA for the year 2022. I have thought about filing for a refund of IRMAA for 2021 as soon as 2020 taxes are completed, but based on the restricted reasons one needs to meet, I am doubtful it will be approved. I'm going to try though. Have you seen anything in writing suggesting that your IRMAA premiums for 2021 will be refunded/reduced?

 

[Crabby Mike]

I'm often puzzled by folks who get (or expect) an exception from IRMAA due to a one-year windfall of whatever sort. In my reading of the grounds for IRMAA appeal, they seem very specific, and don't include this kind of thing. I've considered appeal in a year where I took a one-time capital gain, but reading the instructions, it seemed clearly not allowed. Am I missing something?

 

[Golden sunsets]

I'm often puzzled by folks who get (or expect) an exception from IRMAA due to a one-year windfall of whatever sort. In my reading of the grounds for IRMAA appeal, they seem very specific, and don't include this kind of thing. I've considered appeal in a year where I took a one-time capital gain, but reading the instructions, it seemed clearly not allowed. Am I missing something?

I agree with you Crabby, but I found 2 references on this very example from financial advisors on the internet implying it will work, therefore I am curious about it. My CPA doesn't think its valid, but also stated there is no penalty for filing and being rejected.

 

[steelyman]

Thank you for posting this, bada bing. It’s very helpful.

I’m affected by virtue of a pre-SECURE inherited IRA and think I understand how the calculations will be done but will learn. My IIRA is with Fidelity and they’ve been correct (to the penny) with prior RMDs so I’ll see what they come up with in 2022.

[ADDED] Like others, the new numbers will result in a lowered RMD for me. Now I’ll have to add more lines to the spreadsheet due to getting a longer stretch period (I think? Not sure about that...).

 

[SecondCor521]

Thank you for posting this, bada bing. It’s very helpful.

I’m affected by virtue of a pre-SECURE inherited IRA and think I understand how the calculations will be done but will learn. My IIRA is with Fidelity and they’ve been correct (to the penny) with prior RMDs so I’ll see what they come up with in 2022.

[ADDED] Like others, the new numbers will result in a lowered RMD for me. Now I’ll have to add more lines to the spreadsheet due to getting a longer stretch period (I think? Not sure about that...).

If Fidelity has had the inherited IRA from the beginning, they can calculate, in theory, the new divisor and thus your new RMD for 2022 correctly.

As far as your longer stretch period...no, not really. You'll be taking RMDs until you either empty the inherited IRA or you die. And the lower RMDs only draws out the former and does nothing for the latter.