People complain a lot about life these days, but one fun fact is that people are living longer than they did just 20 years ago. Thankfully, the Internal revenue Service (IRS) noticed too.
The IRS has proposed a new rule regarding the life expectancy and distribution period tables that are used to calculate required minimum distributions (RMDs) from qualified retirement plans, individual retirement accounts (IRAs) and annuities, and certain other tax-favored employer-provided retirement arrangements.
The life expectancy tables and applicable distribution period tables in the proposed regulations reflect longer life expectancies. In the new proposed rules, a 70-year old IRA owner who uses the Uniform Lifetime Table to calculate RMDs has to use a life expectancy of 27.4 years under the existing regulations. Using the proposed, new Uniform Lifetime Table, the IRA owner would now use a life expectancy of 29.1 years to calculate RMDs. That means smaller distributions over a longer period.
The life expectancy tables and Uniform Lifetime Table under these proposed regulations would apply for distribution calendar years beginning on or after January 1, 2021.