RetirementNew RMD Table for 2022

December 23, 2021by Bailey Wealth Services

Starting in 2022, the various life expectancy tables used by owners and beneficiaries to calculate required minimum distributions (RMDs) from qualified retirement plans, IRAs, and nonqualified annuities are being updated. This is being done to reflect the increase in life expectancies experienced since the current tables came out in the early 2000s.  The current tables will still be used to calculate 2021 required minimum distributions (RMD).

 

What is the impact of the new RMD tables for 2022

Ultimately, these changes mean that smaller distributions will be required to be taken on an annual basis, resulting in less taxation and longer-lasting account balances (assuming negative investment performance doesn’t severely affect the account balance), creating more of an opportunity to grow the funds in the account.

For instance, the current Uniform table life expectancy factor for a 73-year-old is 24.7 while the updated Uniform table life expectancy factor for a 73-year-old is 26.5.  The Uniform table is used by most owners of IRAs and qualified retirement plans to calculate their annual RMDs. The increase in the life expectancy factor from the updated table means a smaller RMD for an account holder.  For example, assuming a prior year-end IRA balance of $100,000, the old life expectancy factor of 24.7 results in a RMD of $4,048.59, while the new life expectancy factor of 26.5 results in an RMD of $3,773.59 – a $275 difference, which stays in the IRA to continue to potentially grow tax-deferred.

Beneficiaries of IRAs, retirement plans, and nonqualified annuities who will start using their life expectancy to take out the annual RMD in 2022 will use the new factors from the Single Life table to start their payout schedule (the so-called “stretch” concepts), while those beneficiaries who have been using their life expectancy to take out their annual RMD will need to adjust the life expectancy used in 2022 to reflect these new tables. To adjust the life expectancy used in 2022, the beneficiary must determine what their life expectancy from the new Single Life table would have been in their first distribution year, based on their age on December 31 of that year, and then subtract one for each succeeding year to obtain their 2022 life expectancy factor.

For example, assume the beneficiary of a nonqualified deferred annuity took their initial life expectancy-based payment in 2015 and their life expectancy that year under the old table was 29.6 years (age 55). In 2022 they would determine their age 55 life expectancy from the new Single Life table (31.6) and then subtract one from 2015 for every year until 2022:

  • 30.6 (2016)
  • 29.6 (2017)
  • 28.6 (2018)
  • 27.6 (2019)
  • 26.6 (2020)
  • 25.6 (2021)
  • 24.6 (2022)

Making 24.6 the life expectancy factor to use in 2022, instead of 22.6 under the old factors. They would then continue subtracting one from the prior year’s life expectancy to determine the life expectancy factor to use in each subsequent year.

 

Outlook for the updated life expectancy tables

For many owners and beneficiaries, the overall increase in life expectancy represented in the updated tables are a welcome change as it will reduce the taxation on required distributions and provide more opportunity for growth and longer-lasting account balances.  If you would like to learn more about this change and see both the current and new tables check out our white paper on the table updates, or the final regulation notice at 26 CFR Part 1 [TD 9930] RIN 1545-BP11.  Learn more about the payout options beneficiaries of IRAs and nonqualified annuities can use, by viewing these white papers.

 

 

Sources:

Duncan, Tom. “RMD Tables to Change in 2022.” Nationwide Financial, 19 Nov. 2021, https://blog.nationwidefinancial.com/client-outcomes/retirement-income-planning/rmd-tables-to-change-in-2022/.

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Holly Farrar

Client Services Associate

As director of First Impressions, I strive to make sure our clients have a comfortable and meaningful experience while providing remarkable customer service at the highest standards. I enjoy going to local Everett events and festivities while spending time with friends and family. I love to read, especially dystopian novels.  I am involved in volunteering opportunities within the community including grocery shopping for homebound people, coffee trailer and first responder appreciation.

Education and Biography

Training

Holly Studied Business and Management at Sno-Isle Business and Management & Everett Community College. She has over 20 years of customer service and administrative experience.

Specialisms

Holly’s focus is to create meaningful connections between our clients and our office. She schedules appointments, answers calls, processes transactions, preparing paperwork to maintain accounts as well as opening new accounts, and transfers.

Albert Ballesteros

With over 25 years of customer service working in the Financial Industry and the State of Washington, Albert is a welcome addition to the service team. He helps with opening new accounts and servicing current accounts. You have probably received appointment reminders from him. He also works with the marketing team in planning monthly letters to clients, planning special events and creating the weekly newsletters.
In his spare time, he volunteers at Northshore Christian Church, having completed two mission trips to the Philippines and has a passion for singing. He enjoys playing and watching most sports but is especially an avid fan of the Everett Silvertips.

Education and Biography

TRAINING

Albert attended Honolulu Community College where he obtained his AA in Liberal Arts.

SPECIALISMS

Albert joined Bailey Wealth Services in 2022. His focus is to provide support to both prospective and existing customers with exceptional customer service. He is very personable and brings professionalism to his role.

Wes Burroughs

One of the things I enjoy most about what I do is educating clients on what is available to them as an investor. Our clients know where they’re at financially and where they are going because we make breaking down the complexities of a constantly changing world a top priority. Outside of work, I love spending time with my wife, Blyn, and playing with our daughter, Sophia. I also enjoy running and hosting game night with friends.

Education and Biography

TRAINING
Wes attended Liberty University where he obtained his BA in Philosophy.

SPECIALISMS
Wes joined Bailey Wealth Services in 2021. His focus is helping families maintain and grow the wealth they already have. Wes enjoys working with our valued clients to facilitate financial relationships by providing solutions, solving problems, and helping them manage their financial lives.

A. Sean Bailey, CFP®

My mission is to assist families as they strive to acquire, accumulate and retain wealth in a tax efficient manner so they may live in retirement with confidence and dignity. When I’m not engaged in professional activities, you can find me on a mountain top with my wife, Kim, and our two children, Eleanor and Oscar.

Education and Biography

TRAINING
Sean received his Bachelor’s Degree in Business Administration, Finance Concentration, from the University of Washington.

SPECIALISMS
Sean Bailey has been in the financial services industry for 30 years. He specializes in developing comprehensive financial, estate and retirement planning strategies for clients nearing and in retirement. Sean is a Registered Principal and Investment Advisor with LPL Financial. He is a CERTIFIED FINANCIAL PLANNER™ Practitioner. Sean is also a member of the Financial Planning Association and Ed Slott’s Elite IRA Advisor Group.

Ed Slott’s Elite IRA Advisor Group is not affiliated with Bailey Wealth Services or LPL Financial.

Sonya Jones

I endeavor to provide excellent service to our clients and organizing processes and procedures to ensure our office runs smoothly. When not working, I enjoy spending time with my fiancé, Erik, and our two boys, Lukas and Archer along with our dog Pixie. I love cooking for them and experimenting with different recipes and techniques, including treats for Pixie. Our favorite family activity is taking road trips, especially to California to visit family and friends.

Education and Biography

TRAINING

 

Sonya received her BA in Art at California State University, Chico and has over 25 years of administrative and customer service experience in the financial services and accounting industries.

 

SPECIALISMS

 

Sonya’s focus is to help clients reach their financial goals by assisting them with their various transactions and paperwork to service and maintain their accounts. This includes opening new accounts and initiating transfers from and to financial institutions. Sonya is constantly looking for new ways to improve our processes to ensure we work efficiently and in a manner that creatives positive experiences for our clients.

Sonya Jones

I endeavor to provide excellent service to our clients and organizing processes and procedures to ensure our office runs smoothly. When not working, I enjoy spending time with my fiancé, Erik, and our two boys, Lukas and Archer along with our dog Pixie. I love cooking for them and experimenting with different recipes and techniques, including treats for Pixie. Our favorite family activity is taking road trips, especially to California to visit family and friends.

Education and Biography

TRAINING
Sonya received her BA in Art at California State University, Chico and has over 25 years of administrative and customer service experience in the financial services and accounting industries.

SPECIALISMS
Sonya’s focus is to help clients reach their financial goals by assisting them with their various transactions and paperwork to service and maintain their accounts. This includes opening new accounts and initiating transfers from and to financial institutions. Sonya is constantly looking for new ways to improve our processes to ensure we work efficiently and in a manner that creatives positive experiences for our clients.