Smaller IRA Withdrawals Coming Up

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published 15 December 2020

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.

Retirees Get Another Break with Expansion of RMD Waiver

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%.

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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.