Required Minimum Distribution Formula Change for 2022

08-29-2022Tax Information

The Internal Revenue Service (IRS) updated its actuarial tables that dictate how much a person is required to withdraw from his or her retirement accounts starting at age 72.  This is the first time since 2002. The new tables project longer lifespans. This could be good news for individuals that want to stretch their retirement earnings into the future.

To limit you from keeping your money in a retirement account indefinitely, the IRS requires you to withdraw a specific amount each year once you reach a certain age. The 2019 SECURE ACT pushed back the required age for a Required Minimum Distribution (RMD) to age 72.

The following retirement accounts are subject to RMDs:

  • Traditional IRAs
  • 401(k), 403(b) and 457(b) Plans
  • Profit Sharing Plans
  • Other defined contribution plans

ROTH IRAs are not subject to RMDs.

With the IRS raising the average life expectancy from 82.4 to 84.6, retirees will presumably need to spread their assets over more years. With smaller withdrawals required each year, more of your retirement assets can remain in your retirement account.  You can always withdraw additional funds.