IRS Proposes New Life Expectancy Tables for RMDs

Thursday, November 07, 2019

By Sarah Brenner, JD
IRA Analyst
Follow Us on Twitter: @theslottreport

The IRS has issued new proposed life expectancy tables for calculating required minimum distributions (RMDs) from IRAs and employer plans. This has been a long time coming as the tables currently in use were issued back in 2002. The new tables account for increased life expectancy and should result in lower RMDs for most IRA owners and beneficiaries.

The new tables are currently only proposed, and a hearings and comment period has been scheduled before they can be finalized. If all goes as planned, they would be used for calculating 2021 RMDs. RMDs for 2020 are not affected and cannot be calculated using the new tables.

Here are some takeaways on the new tables:

  • The new tables account for people living longer and include older account owners. While the current tables stop at age 115+, the new ones include retirement account owners up to age 120+. Good news for those IRA owners who are age 119 who will be able to take slightly smaller RMDs!
  • The new factor for age 70 is 29.1 and the new factor for age 71 is 28.2. These will be the factors that many IRA owner will use to calculate their first RMDs. This is an increase from the current factors of 27.4 and 26.5, respectively. These new higher factors mean that IRA owners will be taking less each year as RMDs, allowing more tax-deferred growth over the years and resulting in more retirement savings.
  • There is a transition rule for those beneficiaries using non-recalculated single life expectancies to calculate RMD from inherited IRAs. They will be allowed to switch to the new life expectancy tables.
  • Those taking substantially equal periodic payments [72(t) payments] using the current life expectancy tables will also be allowed to switch to the new tables without concern of modifying the current payment plan.

Keep tuning in to the Slott Report for the latest developments on the new proposed life expectancy tables! To see the new tables and related IRS guidance, please see the following link:

https://www.federalregister.gov/documents/2019/11/08/2019-24065/updated-life-expectancy-and-distribution-period-tables-used-for-purposes-of-determining-minimum

 

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