New RMD Rules For IRAs In 2022

You might need to take a little extra time in 2022 to plan your required minimum distributions (RMDs) from IRAs, 401(k)s, and other qualified retirement plans. A few of the rules have changed. Changes affect both original owners of accounts and beneficiaries who inherited them.

The starting age for RMDs of account owners was changed in a 2019 tax law. If you turned age 70½ in 2019 or earlier, you had the longstanding starting date. Your first RMD had to be taken for the year in which you turned age 70½. Anyone who turned 70½ after 2019 takes the first RMD for the year in which he or she turns 72.

For original owners of accounts, RMDs apply only to traditional IRAs and 401(k)s. Original owners of Roth-type accounts don’t have to take RMDs during their lifetimes.

Beneficiaries who inherited all types of retirement accounts have to take RMDs if they inherited the accounts before 2020. Beneficiaries who inherited retirement accounts after 2019 have to fully distribute the accounts within 10 years but apparently can take distributions at their own discretion. We’re waiting for IRS regulations to make that clear.

Congress suspended RMDs for 2020, but the suspension applied only to that year.  

Another change is that in 2021 the IRS issued new life expectancy tables to be used to compute the RMDs beginning in 2022. The tables have slightly longer life expectancies than the old tables, making RMDs a little bit lower under the new tables than the old ones.

Owners of IRAs and other retirement accounts don’t make any adjustments. To compute your 2022 RMD, simply look up your current age in the new tables for 2022 instead of the old tables. The life expectancy factor for your age is divided into your IRA balance as of December 31, 2021, to arrive at your RMD for 2022.

Beneficiaries who inherited retirement accounts before 2020 and have to take RMDs have a different calculation.

A beneficiary uses the new life expectancy table and goes back to the age at which he or she took the first RMD after inheriting the RMD.

Suppose you took the first RMD in 2019 and were age 57. It’s now three years later. You look up the life expectancy factor for a 57-year-old in the new table (it’s 29.8). You then subtract three from the factor. Your life expectancy factor for 2022 is 26.8. Divide that factor into the account balance on December 31, 2021, to arrive at your RMD for 2022.

The new rules and life expectancy tables are in free IRS Publication 590-b, available on the IRS web site.

These lower RMDs might be short-lived. The pandemic has caused life expectancy to decrease in the U.S. The IRS plans to update the life expectancy tables every few years. The next tables could have shorter life expectancies and result in higher RMDs.