Inherited RMD Life Expectancy factor: Looked up each year, or looked up once and then subtract 1 each year?
For some reason, I’m having trouble understanding whether the Single Table is (a) used each year, or (b) if it’s only used in the year of inheritance, and then decremented by 1 each year.
If the (b), then that would also mean that the updated tables going into effect in 2022 are irrelevant to any account inherited before 2022?
Also if (b), that means the account winds up being emptied, i.e. around the age of 85 for someone who inherited long before that age, whereas if (a), the account trickles down until the beneficiary dies.
Thanks for helping clear this up for me!
Permalink Submitted by Alan - IRA critic on Wed, 2021-12-08 22:22
The single life table determines the divisor in the first beneficiary RMD year, and that divisor is reduced by 1.0 for each successive year. However, because new tables are being introduced starting in 2022, divisors for existing inherited IRAs must be “reset” to reflect the new tables. This is done by determining what the initial year divisor would have been using the new table, then reducing that initial divisor by 1.0 each year thereafter. So your answer is (b), but with reset divisors starting in 2022.
If a sole surviving spouse maintains an inherited IRA, the divisors are not reduced by 1.0 each year. Instead the surviving spouse revisits the table each year to get a new divisor. This is known as “recalculation” and reduces RMD after the first year. Non spouses, on the other hand must reduce by 1.0 each year, known as “non recalculation” and this does not extend the life expectancy due to living another year and will drain the inherited IRA faster.
Permalink Submitted by aldem on Thu, 2021-12-09 01:14
Thank you, Alan!