The finalized rules go into effect on January 1, 2022. This rule change is in addition to the CARES Act waiving 2020 RMDs, the SECURE Act increasing the RMD age to 72, and new post-death distribution rules. RMD rules don't apply to Roth IRAs and any amounts in Health Savings Accounts (HSAs).Other links:
Disclaimer: this is not a site for providing legal, financial, or tax advice. I do this to help me keep track of what's going on. I often misunderstand things / misread things. And, my hunch, no matter how "clear" the IRS thinks their publications are, there will still be a lot of questions.
For me, the two biggest areas of RMDs have to do with inherited IRAs and personal IRAs. My wife is about my same age and their are no heirs involved with regard to our personal IRAs. So, it's pretty straightforward, except for inherited IRAs.
#1: Roth IRAs are not affected. RMDs do not apply to Roth IRAs or Health Savings Accounts.
#2: Personal IRAs -- new longevity tables for 2022. Age 72 is the age which RMDs must be taken. And not six months into the year following per the old rules, or however, it was written. If one turns 72 years of age any time in 2022, one must start taking RMDs in calendar year 2022. The IRS does provide a grace period for one's first time RMD, to April 1 of the following year.
From the johnston link above:
The easiest change to implement is for those account owners taking lifetime RMDs based on the Uniform Lifetime Table. The Uniform Lifetime Table is a “recalculating” table. This means that each year a person will go back to the table to find his age and corresponding life expectancy factor. This new factor is then divided into the December 31 account balance from the previous year to compute the RMD. Since those individuals using the Uniform Lifetime Table are recalculating every year, identifying the appropriate number is straightforward; just go to the chart based on your age as of December 31st of the RMD year. [May turns 73 in 2022; her divisor is: 26.5.]
#3: Where it gets complicated -- inherited IRAs.
#4: The ten-year rule -- most beneficiaries need to deplete inherited IRAs that were inherited in calendar year 2020 (the owner of the traditional IRA died in 2020).
#5: The ten-year does not apply to those who inherited IRAs on or prior to December 31, 2019. This seems to have been a source of confusion (or maybe something changed) prior to the new rules published by the IRS.
$6: Traditional IRAs inherited on or prior to December 31, 2019, two things --
- longevity tables / divisors;
- the "re-set"
Break, break.
There are three RMD life expectancy tables and they were all revised (IRS, 2021):
- Uniform Lifetime Table -- applies to my personal traditional IRA; be careful; I believe this table is now updated every year;
- Joint (and Last Survivor) Life Expectancy Table
- Single Life Expectancy Table -- applies to inherited IRAs
Wow, the rules for those who use the "Single Life Expectancy Table" couldn't be more confusing or wordy, but for me, it's imply the last sentence that's important: "This table is used to calculate annual RMDs from inherited IRAs fro beneficiaries who inherited prior to the SECURE Act in 2020."
2018: the year my father died and I inherited his small IRA that year, before the Secure Act of 2020.
2020: my mother died in late 2020, after the Secure Act of 2020.
#7. The inherited IRA from my father: the longevity table / divisor has changed with the new 2021 rules; and, in addition, there is a re-set, both of which are pretty much "used" simultaneously to determine the RMD for 2022. See next, (#8):
#8: from the cpajournal link above:
In general, if the IRA owner dies after the required beginning date (RBD), in the year following the death, the designated beneficiary can calculate the RMD using the designated beneficiary’s life expectancy on the single life table.
The designated beneficiary’s life expectancy is measured using the beneficiary’s age as of the beneficiary’s birthday in the calendar year immediately following the calendar year in which the individual died. [My father died in 2018, therefore the beneficiary age I use is my age in 2019, or 68 years old.]
[My divisor for age 68 years of age is: 18.6.]
In subsequent calendar years, the applicable distribution factor (life expectancy factor) is reduced by one for each calendar year that has elapsed after the calendar year immediately following the calendar year of the individual’s death. [2019, age 68, divisor is 18.6; for 2020, my divisor reduced by "1" is 17.6. No RMDs required in 2020. In 2021, my divisor was reduced by another "1" or 16.6. My RMD was already established and taken by the time the IRS published the new rules. For 2022, my divisor is reduced by another "1" and will be 15.6 and the RMD is based on the value of the inherited IRA as of December 31, 2021. Once this number is determined in 2019, one never goes back to any table; one simple subtracts "1" from the previous year's divisor.]
The new regulations will require a one-time reset; this is better understood with an example. See example at the link.
Note: the ten-year rule on the inherited IRA from my dad does not apply to me, but it does apply to the heir(s) who inherit that IRA from me.
#9: As noted, the ten-year rule does not apply to me with regard to the IRA I inherited from my dad. If there is anything left in that IRA when I did, the ten-year rule will apply to the heir who inherits this IRA.
#10: for the traditional IRA I inherited from my mother, the rules are much simpler: RMDs are not required ever but the IRA must be depleted within ten years of my inheriting that IRA.
#11: Bottom line for 2022 --
- my inherited IRA from CARL: a divisor of 15.6 based on value of IRA on December 31, 2019;
- my inherited IRA from RUTH: no RMDs required; must be depleted NLT than 2030 (exact date to be determined)
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