required minimum distributions (RMDs)

Proposed RMD Rules Would Trim Mandated Distributions for Retirees

Ways to get your voice heard on possible new life expectancy tables that would affect your money.

Last fall, the Trump Administration issued an executive order that directed the Treasury Department to review the rules for required minimum distributions from qualified retirement plans. Retirement Report readers have been anxiously awaiting news since then. Finally, more than a year later, there is a new development to report: The IRS has issued new proposed life expectancy tables to calculate RMDs.

The new tables take into account longer life expectancies. The current tables stop at age 115+, but the new ones run an extra five years, to 120+. These are the first changes made to the tables since 2002.

What do the new tables mean in practice? When calculating RMDs under the proposed rules, the life expectancy factors would be higher, which means an account owner would take out a smaller amount, leaving more money to grow tax-deferred in the retirement account. For instance, the current factor for someone who is age 71 is 26.5, whereas the proposed rules would set that factor at 28.2. That change means a 71-year-old with a $1 million IRA would be required to take out nearly $2,300 less.

The new tables are not a done deal just yet. The proposed regulations must still go through a few more regulatory steps before they can be finalized. If they stay on track through that process, the new rules would be used to calculate 2021 RMDs. Proceed as usual with the current rules for 2019 and 2020 RMDs.

If you want to share your thoughts about these proposed RMD changes, you can submit a comment until January 7, 2020. To do so, and to learn more about the changes, go to federalregister.gov and search for document number 2019-24065.

The public hearing is scheduled for January 23, 2020.

Most Popular

Don’t Be Tricked Into Voluntarily Paying Higher Taxes on Your IRA
IRAs

Don’t Be Tricked Into Voluntarily Paying Higher Taxes on Your IRA

Traditional IRAs are set up in a way that basically incentivizes you (and your heirs) into paying the highest tax bill possible. Don’t fall for it. Co…
July 4, 2022
Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
Retirees, Make These Midyear Moves to Cut Next Year's Tax Bill
Tax Breaks

Retirees, Make These Midyear Moves to Cut Next Year's Tax Bill

Save money next April by making these six hot-as-July tax moves.
July 1, 2022

Recommended

Should I Hire an Estate Planning Attorney Now That I Am a Widow?
estate planning

Should I Hire an Estate Planning Attorney Now That I Am a Widow?

Many estates are simple enough where no help is needed, but there are several situations where anyone would be much better off getting some profession…
July 5, 2022
How to Use Your Estate Plan to Save on Taxes While You’re Still Alive!
estate planning

How to Use Your Estate Plan to Save on Taxes While You’re Still Alive!

Upstream basis planning is a trust strategy that can save wealthy people on their capital gains taxes and income taxes associated with highly apprecia…
July 3, 2022
Updating Your Estate Plan? Don’t Make These Top Mistakes
estate planning

Updating Your Estate Plan? Don’t Make These Top Mistakes

You’re making the effort to stay on top of your estate plan. That’s great! Now don’t mess it up. Here is how to avoid five of the biggest blunders peo…
June 30, 2022
33 States with No Estate Taxes or Inheritance Taxes
retirement

33 States with No Estate Taxes or Inheritance Taxes

Even with the federal exemption from death taxes raised, retirees should pay more attention to estate taxes and inheritance taxes levied by states.
June 23, 2022