Smaller IRA Withdrawals Coming Up

Starting in 2022, the amount you’ll be required to withdraw from your retirement accounts after age 72 will decline modestly—which means your tax bill will be smaller, too.

Senior reviewing paperwork at her laptop in her kitchen area
(Image credit: Getty Images)

Generally, once you turn 72, you’re required to take a specific amount of money out of your individual retirement accounts (or other tax-deferred plans) every year, whether you need the money or not. Your required minimum distribution is based on the total amount of money in your tax-deferred accounts divided by a factor from IRS life-expectancy tables. The CARES Act, enacted in March 2020 in response to the coronavirus pandemic, allowed seniors to skip RMDs in 2020, but Congress is unlikely to extend that waiver this year.

Starting in 2022, the IRS will use new distribution tables to account for the fact that people are living longer—which means they need their savings to last longer, too. The new formula reflects life expectancies that are about one to two years longer than in the existing life-expectancy tables, which will reduce the size of RMDs. For example, under the current formula, a 72-year-old with $300,000 in an IRA would be required to withdraw $11,719. Under the new formula, her RMD would be $10,948, a difference of about 7%.

The last time the IRS revised the tables was in 2002. You can always take more than the required distribution—and many seniors do. But if you fail to take out the minimum, the penalty is 50% of the amount you should have withdrawn.

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Sandra Block
Senior Editor, Kiplinger's Personal Finance

Block joined Kiplinger in June 2012 from USA Today, where she was a reporter and personal finance columnist for more than 15 years. Prior to that, she worked for the Akron Beacon-Journal and Dow Jones Newswires. In 1993, she was a Knight-Bagehot fellow in economics and business journalism at the Columbia University Graduate School of Journalism. She has a BA in communications from Bethany College in Bethany, W.Va.