The IRS has good news for retirees starting in 2022: you can now keep more money in your retirement accounts thanks to lower Required Minimum Distributions (RMDs). The new Uniform Lifetime Table, which now projects a longer lifespan, is used to calculate the annual RMD from your retirement account.
Why is this good for retirees? With the raise of life expectancy from 82.4 to 84.6, this will require smaller withdrawals each year and more of your assets can remain in your accounts. By raising the life expectancy, retirees will have to spread their assets over more years and as a result the RMD formula for 2022 will be less than previous years. This ultimately will lessen your tax liability and could possibly put you in a lower tax bracket.
Under the new uniform life table, for example, a 75-year-old would use 24.6 as their factor. If the account balance is, say, $500,000, dividing the amount by that factor results in an RMD of about $20,325. Under the old table, the factor for a 75-year-old was 22.9, or $21,834 for a $500,000 account.
If you are a current Prestige Wealth Management client, we will be taking care of this adjustment for you and no further action is needed.
For more detailed information on the new RMD formula, please click on the link below.