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The IRS has new RMD Tables

January 14, 2022

The IRS has new RMD tables. What does this mean? A required minimum distribution, commonly referred to as an RMD, is a required distribution from a qualified, tax-deferred retirement account like a 401k or an IRA (although it does apply to 457s, SEP IRAs, and SIMPLE IRAs as well). This requirement mandates that account owners withdraw a portion of the account and pay taxes on the distribution. The money inside these types of accounts has NEVER been taxed. The RMD is like the IRS saying, “Ok, we have let you save this money without paying taxes on it while you were saving for retirement but now it is time to start paying taxes.”  

The IRS determines the RMD age.  As part of the SECURE Act signed in 2019 the IRS’s required minimum distributions change the start age to 72 (previously the age was 70 and a half - thank you IRS for taking out the half birthday). The age was pushed back but the uniform lifetime table was also under review. This is the factor which the IRS uses to determine the amount of money you have to withdraw from your qualified retirement plans.  Yes, there are a lot of requirements, but if you are over 72 this is important because the penalties are steep if you do not take the distributions as mandated by the IRS.  

Consider the concept this way - your 401k is like a contract with the IRS. It basically says that you can save money now and pay taxes later. That is where Required Minimum Distribution comes into play. Once you are 72 the IRS says it is time to start using that money and paying taxes. However, if you need the money prior to age 72 it is available at age 59.5*.

The amount you must withdraw each year is based on the IRS’s uniform lifetime tables. Beginning in 2022 the tables have been updated. The good news is that the IRS is giving everyone a longer life expectancy, so you are required to take out less money each year. The actual amount is based on the account value on December 31st the year prior to the distribution. For example, if Mrs. Jones has an IRA worth $100,000 on December 31st, 2021, and she turns 72 in 2022 then she is required to take out $3,649.63 or 3.649%   Before this change, a 72-year-old was required to take out $3,906.25 or a percentage of 3.91%. The IRS is not trying to get you to run out of money. The intended goal is that the money will be withdrawn slowly over the rest of your life so that it is not passed onto the next generation.  This gets complicated so it is always best to seek the advice of your financial planner or tax preparer (preferably both) regarding this issue. ** for further information

Lincoln Financial Advisors Corp. and its representatives do not provide legal or tax advice.  You may want to consult a legal or tax advisor regarding any legal or tax information as it relates to your personal circumstances.  CRN-4170873-011322


*Per the website: Most retirement plan distributions are subject to income tax and may be subject to an additional 10% tax.


Generally, the amounts an individual withdraws from an IRA or retirement plan before reaching age 59½ are called ”early,” or, ”premature” distributions. Individuals must pay an additional 10% early withdrawal tax unless an exception applies.


credit: IRS