RMDs: An IRS Change is Making Them Smaller in 2022
While the process may seem mysterious, the methodology of calculating your required minimum distribution (RMD) is rather simple. Your yearly RMD is calculated using a formula based on the IRS’ Uniform Lifetime Table. Basically, this table estimates the maximum number of years (also known as distribution periods) your retirement account may need to make RMDs to you and your surviving spouse.
The table and its associated distribution periods are based on complicated actuarial calculations of projected life expectancies. Until 2021, the table reflected life expectancy data from 2012. In 2020, the IRS updated the table to reflect its assumptions of longer life expectancies (this work was done before COVID-19, which reduced the average life expectancy for Americans by 1.8 years). These changes just went into effect on January 1, 2022.
Why does this matter? Because longer life expectancies mean longer distribution periods.
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