In November 2020, the IRS issued regulations that included updated Life Expectancy Tables used for calculating Required Minimum Distributions (RMDs). The new tables are effective for 2022 RMDs. The life expectancy tables and applicable distribution period tables in the regulations generally reflect longer life expectancies. For example:
- A 72-year-old IRA owner who applied the Uniform Lifetime Table under 2021 applicable rules to calculate a 2021 RMD, used a life expectancy of 25.6 years. Under the updated rules, a 72-year-old IRA owner will use a life expectancy of 27.4 years to calculate a 2022 RMD.
- A 75-year-old surviving spouse who is a sole beneficiary and applied the Single Life Table under 2021 applicable rules to calculate a 2021 RMD, used a life expectancy of 13.4 years. Under the updated rules, a 75-year-old surviving spouse who is a sole beneficiary will use a life expectancy of 14.8 years to calculate a 2022 RMD.
The effect of these changes is to reduce required minimum distributions generally, which will allow individuals to retain larger amounts in their retirement plans to account for the possibility they may live longer.
Fidelity systems were updated in early January to reflect the new Life Expectancy Tables. Any RMD and life expectancy estimates that are calculated by Fidelity are being calculated using the new tables effective for 2022 RMDs.
For inherited IRA/retirement accounts, also referred to as Beneficiary Distribution Accounts or BDAs, Fidelity does not provide RMD calculation services. A beneficiary who wishes to establish a periodic distribution plan to satisfy their RMD has the option to establish a plan that will pay distributions based on their or another beneficiary’s life expectancy, as applicable.
- For beneficiaries who choose their own life expectancy for determining their RMD, a Life Expectancy Plan is established. These Life Expectancy Plans have been automatically updated to calculate the payments based on the new tables.
- For beneficiaries who choose another beneficiary’s life expectancy for determining their RMD, a Fixed Period Plan is established using the life expectancy factor that is in effect at the time it is established. Fixed Period Plans will not be automatically updated in 2022 or beyond. These beneficiaries may want to review their Fixed Periodic Plans with their investment or tax advisor to determine whether or not to update their plan using the 2022 life expectancy factors. If the client decided they wish to update one of these plans, please obtain a letter of instruction or client email and forward to Brokerage Operations for processing.
Please contact 1-800-344-7437 with any questions.
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