Determining Your Required Minimum Distributions Using Life Expectancy Tables

In 2022, new life expectancy tables from the IRS go into effect. The IRS has not updated their life expectancy tables in 20 years. This means that RMDs for retirees and those who have inherited an IRA will be lower than they have been in the past. But, how much lower are they? And how does that impact retirees?

Life Expectancy Continues to Increase 

If you look at current data, the average life expectancy in the U.S. (as of 2022) is 79.05 years old. This is a 0.08% increase from 2021. In fact, if you look at the average life expectancy since 1950, it has steadily increased year over year, and is projected to continue on this trend until 2102.

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On average, men are living to 78 years old and women are living to 81 years old. It’s important to remember this is an average! Many retirees are living up to 90 years old, and if both members of a couple live that long, the likelihood they’ll stay healthy (and live longer) is high. As a financial planner, I see this more and more. Personally, my own parents are in their mid-80’s, and many of my clients’ parents are in their 80s or 90s right now. It’s critical to plan with life expectancy in mind, and these changing life expectancy tables will help to make that possible.

Where Does the IRS Publish Life Expectancy Tables and Corresponding Distribution Requirements?

Due to increased life expectancy projections in the U.S., the IRS has created new life expectancy tables for Required Minimum Distributions (RMDs) for retirees who have IRAs. The life expectancy tables they use are the Uniform Lifetime Table (used by most retirees taking RMDs), and the Single Life Expectancy Table (used for beneficiaries who have inherited an IRA).

What Does This Mean For Retirees?

Per Sarah Brenner, Director of Retirement Education at Ed Slott & Co, “The new tables can be used by anyone who is taking RMDs, even those who inherited an account a long time ago or those way beyond their RMD required beginning date. One exception is for those who reached 72 in 2021 and decided to delay their first RMD into 2022 (before April 1, 2022). Those individuals need to use the old tables to calculate that delayed 2021 RMD even though they can take it in 2022.”

In other words, retirees can expect that their RMDs in 2022 and beyond will be notably lower in order to help retirees stretch their savings over the course of their lifetime. This could also mean lower taxes on your income in retirement, and another way to maximize cash flow throughout this chapter of your life.

Looking for help calculating your RMDs, or finding a tax-efficient way to take your RMDs to maximize your cash flow? Retirees or those who have inherited an IRA can calculate their RMD using this worksheet from the IRS. It’s also wise to team up with a fee-only financial planner to create a retirement cash flow, or withdrawal, strategy that meets your unique financial and lifestyle needs. I’d love to answer any questions you have regarding the IRS life expectancy tables, and calculating your RMD accordingly. Start the conversation by clicking here.

Wood Smith Advisors, a woman-owned Registered Investment Advisor (RIA), is a fee-only financial services firm that partners with its clients to simplify their financial lives. We focus on women, entrepreneurs, and individuals with complex financial situations, providing objective and competent advice, education and services to help them develop and build their businesses and reach their financial goals. We can be reached by clicking here.

"Finance Made Simple" blog posts are intended for educational purposes and not for specific advice. Each person’s situation is different. Consult your financial advisor for advice relating to topics discussed.

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