Changed RMD Tables for 2022

[phil1ben]

I handle the RMD's for my 89 year old mother who is still as sharp as a tack. About 60% of her NW is in a tIRA so her distributions are relatively substantial. She always wants to take the RMD in full in January. Her money her choice. In any event I just looked at the RMD tables for 2022 in preparation of effectuating some sales to make the distribution next month.

FYI: I didn't realize that the Tables were revised for 2022 to reflect the Secure Act and revised mortality tables. The result is that her RMD for 2022 was about 20% less than the RMD for 2021. This was good news for her.

 

[USGrant1962]

I've been doing the same exercise for my DM.

Here's a great side-by-side table of old versus new RMDs, from Kitces:

https://www.kitces.com/current-vs-new-uniform-lifetime-table-rmd-as-a-percentage-of-account-balance/

I'm not sure how your mom's RMD dropped 20%, the tables didn't go down nearly that much (2nd to last column). If your mom was 88 this year her RMD factor was 12.7 on the old table, and at 89 next year it is almost the same at 12.9 on the new table (instead of 12.0).

Most ages are a 6-8% drop, and even less year-over-year as you age.

 

[Romer]

This was very helpful. For some reason I was using the wrong factors from the IRS table and have changed to go along with this. For some reason what I had was 15.6 factor the first year instead of the 27.4 here. Continuing to learn and update my plans

The linked article shows starting this at 72 instead of 70 below
https://thefinancebuff.com/new-rmd-tables-2022.html

 

[Another Reader]

Someone want to explain the rules for inherited IRA's inherited under the old rules? 2007 DOD in this case... Less is better, if possible!

 

[GrayHare]

IRAs inherited under the old rules continue to use the old rules.

 

[Another Reader]

IRAs inherited under the old rules continue to use the old rules.

Probably why it wasn't on my radar... Thanks!

 

[SecondCor521]

IRAs inherited under the old rules continue to use the old rules.

They use the old rules but the new tables.

There is a moderately complicated calculation to do in order to switch from the old tables to the new tables. See the "One Time Reset" section of this article for example: https://thefinancebuff.com/new-rmd-tables-2022.html. The only quibble I have with that article is they use the word "allow" where I think they should use "require". I believe switching to the new tables is mandatory.

 

[oldtimer]

They use the old rules but the new tables.

There is a moderately complicated calculation to do in order to switch from the old tables to the new tables. See the "One Time Reset" section of this article for example: https://thefinancebuff.com/new-rmd-tables-2022.html. The only quibble I have with that article is they use the word "allow" where I think they should use "require". I believe switching to the new tables is mandatory.

You are allowed to continue with reducing the old distribution period by 1, which will cause you to take out more than 2022 reset would require. The M is Minimum that is Required to Distribute - they allow you take more than the RMD. But if you want to reduce your tax bill and don't need the cash, reset.

 

[SecondCor521]

You are allowed to continue with reducing the old distribution period by 1, which will cause you to take out more than 2022 reset would require. The M is Minimum that is Required to Distribute - they allow you take more than the RMD. But if you want to reduce your tax bill and don't need the cash, reset.

Of course.

ETA: Of course, if the person wanted the absolute lowest RMD in a future year, at some point they'd need to go through the calculation to switch over to the new tables. For inherited IRAs you can't just switch to the new divisor in the new table.

 

[Another Reader]

I made the calculation. It reduces the RMD by a decent amount. In a week, we will see if Fidelity agrees...

 

[oldtimer]

Of course.

ETA: Of course, if the person wanted the absolute lowest RMD in a future year, at some point they'd need to go through the calculation to switch over to the new tables. For inherited IRAs you can't just switch to the new divisor in the new table.

How I read the reset requirement it is a one time decision that happens in 2022. However you calculate 2022 RMDs, you then have to subtract 1 from the number used in 2022 for each future year.

 

[steelyman]

I made the calculation. It reduces the RMD by a decent amount. In a week, we will see if Fidelity agrees...

I take the RMD for a pre-Secure Act inherited IRA early in the year and it has been posted to my Fidelity account. Looks like Fidelity agrees to me.

 

[Koolau]

Simple as it should be, I'm still glad Megacorp/401(k) company does my one and only calculation for me. YMMV

 

[The Cosmic Avenger]

FYI, for anyone using Fidelity, I just checked, and while they link to the old tables in a couple of places, when I checked my actual scheduled RMDs that I set up with Fidelity when I inherited my (pre-SECURE Act) IRAs, the factor was from the new tables.

 

[RetiredHappy]

My husband did a partial RMD yesterday from Fidelity and their calculated amount was using the new table.

 

[Another Reader]

I was pleasantly surprised to see that Fidelity applied the new table. Technically you have a choice, but Fido assumed everyone would prefer the option to delay liquidation and take more if they chose to do so.

 

[SecondCor521]

Vanguard used the new tables on my Dad's IRA.

 

[Animorph]

DM has one tIRA of her own and one inherited.

Her own RMD was a simple switch to the new table.

Her inherited tIRA was scheduled to have a divisor of 0.7 by the old table for 2022, emptying it. For the new table, I substituted the new divisor for the year she started taking RMD's from the account, using her age at the time. My spreadsheet did all the minus 1's and updated the 2022 divisor to 1.1. So we don't have to empty the account this year, but there'll be just a drip left for 2023.

That all made sense to me, and the final result agreed with Fidelity's RMD calculations for both accounts.

 

[scrabbler1]

My (snake-bit) friend has had an inherited IRA which I help him manage since late 2012, when his remaining parent passed away. The divisor in his RMD calculation has been dropping by one each year, as expected, usually raising his RMD unless its year-end balance dropped by a lot like what happened in late 2018.

But for 2022, with the change in the tables, the divisor went up by 2 (years), lowering his 2022 RMD by about $300. This will be useful in the next few years because it will allow the cash-generating portion of the IRA to continue generating enough cash to pay the RMD without having to sell anything. I set up this auto-pilot feature to make managing his IRA a little easier for me (and he is fine with that).

He doesn't need the RMD to help pay his bills because he still works full-time (he is 58). We use it, instead, to pay some income taxes via 1099R withholding. This keeps his April tax bill down and assures him of avoiding any chance of underwithholding. It's all seamless and transparent, which he likes.

 

[Bamaman]

I just wish the IRS would make it simple. All their charts are so confusing.

For my first RMD at age 72, what percentage of my 12/31/2021 IRA Rollover balance to I need to withdraw in 2022?

Now I need to project my income for 2022 in order to setup future tax withdrawal amounts. Obviously, I'll be kicked up a notch or two in tax liabilities.

 

[SecondCor521]

I just wish the IRS would make it simple. All their charts are so confusing.

For my first RMD at age 72, what percentage of my 12/31/2021 IRA Rollover balance to I need to withdraw in 2022?

Now I need to project my income for 2022 in order to setup future tax withdrawal amounts. Obviously, I'll be kicked up a notch or two in tax liabilities.

Assuming you're turning 72 in 2022, and you're either single or married with a spouse who is within 10 years of your age (and maybe a few other caveats), you would take your 12/31/2021 year end balance and divide that by 27.4 to arrive at your RMD amount. This is approximately equivalent to a withdrawal of 3.65%.

Generally speaking your IRA custodian should be able and willing to do the calculation for you. They might even have an RMD service where they make the RMD for you automatically. If you're unsure of the calculation, doublechecking with them would be a good idea to minimize error.

 

[Koolau]

I just wish the IRS would make it simple. All their charts are so confusing.

For my first RMD at age 72, what percentage of my 12/31/2021 IRA Rollover balance to I need to withdraw in 2022?

Now I need to project my income for 2022 in order to setup future tax withdrawal amounts. Obviously, I'll be kicked up a notch or two in tax liabilities.

If you can't find the table here on our site, you can google it. It's actually simpler than it sounds. When in doubt, take a little extra. Penalties for not taking enough are draconian (50% of what you should have taken but didn't.) I'm surprised your tIRA custodian doesn't calculate the amount for you. Maybe that's only for 401(k) custodians. Mine gave me the required amount to the penny. YMMV

 

[SecondCor521]

Regarding the draconian penalty, yes, it is 50% of the amount that should have been taken but wasn't. See Form 5329, I think it's "Excess Deferral" or something similar.

However, it is possible to request a waiver of the penalty. It is my understanding that the IRS is generally lenient, especially for the first RMD. If one requests a waiver, one should also take a corrective distribution of the amount one should have taken but didn't. This corrective distribution should be in addition to the RMD for the year in which the corrective distribution was taken.

Another option to remember is that for your first year, you have until April 1st of the year following your age-72 year to complete your first RMD. It isn't much extra time, but if you take what you think your RMD should be this year and find out you're a bit low, you can take the additional amount by April 1st (2023 in this case) and not even have to do the penalty waiver thing.

The April 1st thing is only for your first RMD, not for any subsequent years.

 

[Souschef]

I have a spreadsheet that does the calculations. I have downloaded the IRS table to use in the RMD calculations.
For a sanity check, both my brokers also calculate the RMD. Fortunately, we are spot on with their numbers.

 

[aja8888]

I have a problem with this year's RMD amount. Schwab emailed me and said here is your RMD calc;

$713,111.03 (TIRA final balance at 12/31)

RMD calculated by Schwab = $33,445.68

Now my age at the end of this year will be 79
I am not making my spouse the beneficiary of the IRA

My IRS chart factor is 21.1 (Care act table per IRS)

My calculations show $33,796.73

OK, who is right?

No matter which tables I use, I can't duplicate their number.