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 But if you fail to take out the minimum, the penalty is 50% of the amount you should have withdrawn.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
-
AI Stocks Lead Nasdaq's 398-Point Nosedive: Stock Market TodayThe major stock market indexes do not yet reflect the bullish tendencies of sector rotation and broadening participation.
-
Top Tech Gifts to Grab at Walmart Before ChristmasBig savings on Apple, Bose, HP, Vizio and more while there's still time to shop.
-
AI Appliances Aren’t Exciting Buyers…YetThe Kiplinger Letter Artificial intelligence is being embedded into all sorts of appliances. Now sellers need to get customers to care about AI-powered laundry.
-
New 2026 Tax Change Could Mean More for Your IRA and 401(k) SavingsRetirement Savings Here's how the new IRS inflation adjustments will increase the contribution limits for your 401(k) and IRA in the new year.
-
10 Retirement Tax Plan Moves to Make Before December 31Retirement Taxes Proactively reviewing your health coverage, RMDs and IRAs can lower retirement taxes in 2025 and 2026. Here’s how.
-
Claiming the Standard Deduction? Here Are Five Tax Breaks for Retirement in 2025Tax Tips If you’re retired and filing taxes, these five tax credits and deductions could provide thousands in relief (if you qualify).
-
IRS Names Its First CEO: But He’s Also Still Running Social SecurityTax News Will this new role make it difficult to address emerging issues like budget and staffing cuts and customer service concerns?
-
IRS Phasing Out Paper Checks: What Happens After September 30?Tax Changes Avoid delays when IRS tax refunds and Social Security paper checks are cut off. Here’s what to know.
-
Ask the Editor, September 12: Tax Questions on 529 Plan Rollovers to a Roth IRAAsk the Editor In this week's Ask the Editor Q&A, we answer four questions from readers on transferring 529 plan money to a Roth IRA.
-
New Bill Would End Taxes on Social Security Benefits in 2026: What Retirees Should KnowTax Law Congress could look to high earners to help offset lost revenue and possibly shore up the Social Security program.
-
Ask the Editor, August 29: Tax Questions on Estate and Gift TaxesAsk the Editor In this week's Ask the Editor Q&A, we answer questions from readers on estate and gift taxes.
