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New IRS Formulas Change How Much Retirees Must Withdraw for 2022

Here is a rare bit of good news from the IRS: Retirees may have smaller required minimum distributions for 2022, thanks to a change in the federal agency’s life expectancy tables.

RMDs — which apply to most types of retirement accounts — are mandatory annual withdrawals that retirees make beginning in the year when they turn 72.

As CNBC explains:

“The amount you must withdraw each year is generally determined by dividing the previous year-end balance of each qualifying account by a ‘life expectancy factor’ as defined by the IRS.”

That life expectancy factor comes from IRS charts that are often referred to as life expectancy tables.

Recently, these tables were updated to account for longer lifespans, with the changes affecting RMDs for 2022 and later.

In the old tables, life expectancy at birth was 82.4 years. The updated tables bump that up to 84.6 years.

ThinkAdvisor reports that these are the first updates to the life expectancy tables in two decades.

The updates mean RMDs now are expected to be spread out over a longer period. As a result, each annual RMD withdrawal will be slightly reduced — which is good news for retirees’ taxes.

RMDs generally are taxable income. So, smaller RMDs mean potentially lower taxes for retirees.

At the Ed Slott & Co. website, Sarah Brenner, director of retirement education, notes that anyone who withdraws an RMD for 2022 or thereafter can use the new tables, even folks who inherited an account long ago and those who have been withdrawing RMDs for years.

If you want to see the new tables, put on your explorer’s cap. As Forbes notes, they are not easy to find — or to interpret, for that matter.

The publication says the “official place” to look is the latest version of IRS Publication 590-B, but only a draft of that publication is available at this time.

You also can find the new tables in the document in which the IRS first announced them: Internal Revenue Bulletin 2020-49 — specifically, section 1.401(a)(9)-9.

An easier but informal way to get an idea of the amount of a particular RMD withdrawal is to use an RMD calculator like the one offered by the U.S. Securities and Exchange Commission’s Investor.gov website.

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