Most people are unaware the IRS has changed RMD rules again!

If you have a tax-deferred account like an IRA make sure you know the new rules.

1. Under the Secure Act, the Required Minimum Distribution (RMD) starting age was pushed back to 72.
2. Another change is now applicable in 2022. This change lowers RMD amounts to accommodate for people living longer.
3. In this post we breakdown what you should know and walk through an example of how this will impact retirees.

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Posts mentioned:
– New RMD Table:
– Qualified Charitable Distribution Strategy:

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Disclosures:

0:00 RMD changes to know about.
0:37 New RMD calculation change.
1:08 RMD on inherited IRAs
1:31 How your RMD is calculated
2:40 Give your RMD to charity & avoid taxes…(read more)

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New RMD Rules for 2022 – Don’t Miss This Change!

One of the critical aspects of retirement planning is the requirement of taking a minimum distribution from your retirement accounts, known as the Required Minimum Distribution (RMD). These distributions are mandatory and must be withdrawn from your tax-advantaged retirement accounts once you reach a certain age. However, in 2022, there are some important changes to the RMD rules that you should be aware of to stay on top of your retirement planning.

Firstly, it’s vital to understand that RMDs were created to ensure that individuals who have saved in tax-advantaged accounts, such as Traditional IRAs or 401(k) plans, will eventually pay taxes on those funds. The IRS sets an age when RMDs must begin, usually at 70 ½ until recently. Under the new rules, however, the age for starting RMDs has been increased to 72. This change, which first applied to individuals who turned 70 ½ in 2020 or later, is designed to provide individuals with more flexibility and allow their retirement funds to grow for a longer period before being required to withdraw them.

Secondly, the new rules also modify the RMD calculation tables. These updated tables reflect increasing life expectancies and are intended to lower the amount that individuals must withdraw each year. This change benefits retirees, as it helps to preserve their retirement accounts for a more extended period, allowing for potential growth and possibly leaving a larger legacy for their heirs.

Another significant change to the RMD rules is the suspension of 2022 RMDs for retirees. This was introduced as part of the broader COVID-19 relief measures but has been extended into 2022. This means that retirees who would have otherwise been required to take an RMD in 2022 now have the flexibility to leave those funds in their retirement accounts, providing another opportunity for potential growth. However, it is important to discuss this option and its implications with your financial advisor or tax professional to fully understand the impact on your specific circumstances.

For those who find themselves in the fortunate position of not needing their RMD funds for living expenses, there is an alternative worth considering. Qualified Charitable Distributions (QCDs) allow individuals to donate all or a portion of their RMDs directly to a qualified charity. This strategy has several tax advantages, such as reducing annual taxable income while fulfilling charitable giving goals. Additionally, QCDs can fulfill the RMD requirement while potentially keeping your Social Security income from being subject to higher taxes.

In conclusion, the RMD rules have experienced significant changes in 2022 that should not be overlooked by retirees and those planning for retirement. With the shift in the RMD start age to 72, the updated calculation tables, and the suspension of 2022 RMDs, retirees have an opportunity to maximize their retirement savings and potentially leave a larger legacy for their loved ones. Exploring all available options, such as qualified charitable distributions, can help individuals optimize their retirement income and minimize their tax liability. Be sure to consult with your financial advisor or tax professional to fully understand how these changes affect your retirement plans and make the most informed decisions for your financial future.