A Question about IRS new LIfe Expectancy tables and 2022 RMD calculation.

[TomYoung]

The IRS's new Single Life Expectancy table to be used in 2022 and after shows that the life expectancy at age 53 is 33.4 years. That is 2 years more than the Single Life Expectancy shown in the previous actuarial table.

My understanding is that for non-spousal IRAs inherited many years ago where the beneficiary has been taking RMDs calculated using the old table, for 2022 the derived life expectancy used for the RMD will be calculated "as if" the new table was in use all along. So where the old table required a life expectancy figure of 11.4 years for 2022, the beneficiary would instead use 13.4 years in the RMD calculation, the figure derived from the new table.

Is my understanding correct?

[jtax]

Not sure you have given us quite enough info (when did you inherit the IRA and what age were you at the time?) But I might be misunderstanding. I also think of it a little differently, but I believe the math works out the same.

Let's say you are 52 in the year of the IRA owner dies and it is 2018. That year you don't have an RMD. The original owner might have one depending upon their age. If they were required to take an RMD in that year but didn't do so before they passed, you must take out their RMD.

The next year (2019) you are age 53. The old single life table says the life expectancy divisor is 31.4. That year your RMD is 1 / 31.4 of the 12/31/2018 balance. Each subsequent year you subtract one from the divisor. You never look at the table again.

In 2020 your RMD would have been 1/30.4 of the 12/31/2019 balance, but that was waived by the CARES Act because of the pandemic.

In 2021 your RMD would have been 1/29.4 of the 12/31/2020 balance.

In 2022 under the old table your RMD would have been 1 / 28.4 of the 12/31/2021 balance.

However under the new rules it is "reset" and calculated as if the new table had been in effect in 2019. The new table divisor for age 53 is 33.4 so pretend that applied in 2019. Then 2020 is would be 32.4, 2021 31.4, and 2022 30.4. 

See this article for the details about the change and an good example:

https://www.irahelp.com/slottreport/hitting-reset-button-2022-rmds

(Basically you go back to the time you inherited the IRA and lookup the divisor factor in the new table (which will be larger than the old table, resulting in a lower RMD). Then you subtract one from the divisor for each year since then. 

old table: https://www.irahelp.com/printable/2020-single-life-expectancy-table

new table: https://www.irahelp.com/printable/2022-single-life-expectancy-table

[dmertz]

@TomYoung , yes, your understanding is correct.  A non-spouse beneficiary of a decedent who died in 2001 and the beneficiary was age 53 in 2002 would have had an a life-expectancy factor for 2022 of 11.4 under the old table but now has a factor of 13.4 under the new table.

[lphauck]

I don't know if this information is correct, but I pasted your exact question in BARD and received the following response.  I tried to verify the response from the links, but could not find any guidance on the transition.  Also note that it says " For beneficiaries who inherited the IRA before January 1, 2022: They CAN continue using the old life expectancy table....   It doesn't say you MUST ...

BARD (12/26/2023) 

No, your understanding is not entirely correct. While the new Single Life Expectancy table does indeed show a longer life expectancy at age 53 (33.4 years compared to 11.4 years in the previous table), the IRS has provided transition rules for applying the new table to existing inherited IRAs.

Here's how it works:

• For beneficiaries who inherited the IRA before January 1, 2022: They can continue using the old life expectancy table (with one-year reductions) to calculate their RMDs for five years, starting from the year of inheritance. This means, for a beneficiary who inherited the IRA in 2018 and is 53 years old in 2023, they would use a life expectancy of 10.4 years (11.4 years minus one year for each year since inheritance) for their 2023 RMD calculations.
• After the five-year transition period: Beneficiaries must then switch to using the new life expectancy table, with one-year reductions as usual.

Therefore, in your example, the beneficiary would not use the full 13.4 years from the new table for their 2022 RMD calculation. They would still use the old table with a one-year reduction, resulting in a life expectancy of 10.4 years.

Here are some resources for further information:

• IRS Publication 590-B: https://www.irs.gov/retirement-plans/plan-participant-employee/required-minimum-distribution-workshe...
• A Question about IRS new LIfe Expectancy tables and 2022 RMD calculation: https://ttlc.intuit.com/community/retirement/discussion/required-minimum-distribution-tax-year-2022/...

I hope this clarifies the application of the new Single Life Expectancy table to inherited IRAs. It's important to remember the transition rules to ensure you're calculating your RMDs correctly. If you have any further questions or require specific guidance based on your situation, it's recommended to consult with a tax professional.

Ignore the post above that was created by BARD.  I found the answer.  You do not need to use the OLD tables for 5 years.

See "Publication 590-B (2022), Distributions from Individual Retirement Arrangements (IRAs)" which contains these 2 paragraphs"

Revised life expectancy tables for 2022. If you are a beneficiary who was taking required minimum distributions prior to 2022 based on your life expectancy in the year following the owner’s death using the life expectancy tables in effect before 2022 and reducing that number by 1, you can reset your life expectancy for 2022 based on the new tables. In order to do this, find your life expectancy based on your age in the year following the owner’s death on Table I and reduce that number by 1 for each year since the year of the owner’s death.

Example. Your father died in 2019 at the age of 80 and you were the designated beneficiary. You started taking required minimum distributions from the inherited IRA in 2020 when you were age 55, using a life expectancy of 29.6 and reducing that number by 1 each year so that in 2023 (3 years later) the required minimum distribution would be determined by dividing the account balance by 26.6 (29.6 – 3). However, under the new life expectancy tables, the life expectancy for a 55-year-old is 31.6; therefore, you calculate your required minimum distribution for 2023 by dividing the account balance by 28.6 (31.6 – 3).

[dmertz]

I too am unable to locate any such IRS guidance regarding the transition rule alluded to by the Bard AI chatbot, so such a transition rule might not actually exist.  AI chatbot's are well known to simply make stuff up.  As a follow-up, you might try asking Bard to provide a link to the IRS guidance.

Even if such guidance does exist, one can always take out more than the minimum required, so the only purpose for using the old table during the transition period where the old table provided a shorter life expectancy might be if the particular investment in the retirement account (perhaps a CD) has some sort of penalty for a distribution that is otherwise not considered to be an RMD.

Also, the new Single Life Expectancy table only shows shorter life expectancies for those ages 95 through 101 and those would only apply if the beneficiary was that age in the year following the year of death of the participant.  The difference is only 0.1 or 0.2 years.

It seems unlikely that the IRS would bother providing such a transition rule for such seemingly limited and relatively trivial circumstances.

[dmertz]

The final regulation regarding recalculation of the applicable distribution period is 1.401(a)(9)-9(f)(2)(ii):

(ii) Determination of applicable distribution period —(A) Distribution period based on new life expectancy . With respect to a life expectancy described in paragraph (f)(2)(i) of this section, the distribution period that applies for a distribution calendar year beginning on or after January 1, 2022, is determined by using the Single Life Table in paragraph (b) of this section to determine the initial life expectancy for the age of the relevant individual in the relevant calendar year and then reducing the resulting distribution period by 1 for each subsequent year. However, see section 401(a)(9)(H)(ii) and (iii) for rules limiting the availability of a life expectancy distribution period.

While IRS Pub 590-B says that you "can" recalculate the distribution period, the final regulation seems to say that you must recalculate.  For most (but not all), that means a lower RMD.