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Showing posts with label RMD formula changing for first time in decades. Show all posts
Showing posts with label RMD formula changing for first time in decades. Show all posts
The IRS has good news for retirees starting in 2022: you can now keep more money in your tax-deferred retirement accounts thanks to lower required minimum distributions (RMDs). For the first time in 20 years, the Internal Revenue Service has updated its actuarial tables that dictate how much a person is required to withdraw from his or her retirement accounts starting at age 72.
The new tables, which now project longer lifespans, are used to calculate RMDs from individual retirement accounts, 401(k)s and other retirement savings vehicles each year. For help with planning out RMDs and meeting your retirement income needs, consider working with a financial advisor.
One of the primary benefits of retirement accounts are the tax advantages they provide. Traditional IRAsand 401ksallow retirement savers to defer taxes until they withdraw money from their accounts. This allows the money to continue to grow at a faster rate over time. However, you can only defer taxesfor so long. 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.
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Previously, you were required to start taking withdrawals from your IRA or employer-
sponsored retirement plan when you reached age 70.5. But the 2019SECURE Actmade a
critical change to when RMDs begin. If you reached age 70.5 in 2019 the prior rule
applied, and you had to take your first RMD by April 1, 2020. Yet if you reached age 70.5 in
2020 or later you must now take your first RMD by April 1 of the year after you reach 72.
Taxpayers with the following accounts are subject to RMDs:
SEP IRAs
SIMPLE IRAs
Traditional IRAs
401(k) plans
403(b) plans
457(b) plans
Profit sharing plans
Other defined contribution plans
It’s important to remember that Roth IRAs are not subject to RMDs.
Calculating your RMD is relatively easy. First, look up the market value of your retirement account as of Dec. 31 from the previous year. Then, divide that value by the distribution period figure that corresponds with your age on the IRS Uniform Lifetime Table.
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For example, a 72-year-old retiree with $500,000 in her IRA would divide $500,000 by her distribution period figure, which is 27.4. As a result, she would be required to withdraw at least $18,248 from her IRA in 2022.
Your Tax Pro On Demand,
R Clyde Olivieri, Jr.
P.S.
Should you believe to have fallen into a situation related to this issue and
know not what to do, or how to handle your specific matter, call us now, at 215.550.3636, from 1000am
until 1000pm, Monday through Sunday. We will come up with solutions or suggestions,
related to your potential tax consequences.
