June 2022 Question Of The Month

By Admin Prepare

June 13, 2022

Hello. I inherited a traditional IRA from my mother who passed away in 2020 at the age of 81. I understand, based on the new rules that went into effect the beginning of 2020, that I must empty the account within 10 years. I’m trying to calculate my 2022 RMD and need some assistance. I used several online calculators, and none of them calculated a RMD amount because they all say no RMD is required as long as I withdraw the full amount by the end of the 10th year after death. Do I have a RMD to meet, and if so, how can I calculate the correct 2022 RMD amount? Thank you. Rhonda

Hello, Rhonda. This is a very good question; it’s one that will affect many people this year. There have been several rule changes in this area lately, including some that occurred in 2022, which will affect both the original owners of accounts as well as the beneficiaries who inherit them. Thus, you might need to take a little extra time in 2022 to plan your required minimum distributions (RMDs) from IRAs, 401(k)s, and other qualified retirement plans and inherited qualified accounts.

Let’s start with the changes that happened a couple of years ago. The starting age for RMDs of account owners was changed in a 2019 tax law. If you turned age 70½ in 2019 or earlier, you had the longstanding starting date. Your first RMD had to be taken for the year in which you turned age 70½. Anyone who turned 70½ after 2019 takes their first RMD for the year in which he or she turns 72. Another change for this year is the IRS issued new and updated life expectancy tables to be used to compute RMDs beginning in 2022. The new tables have slightly longer life expectancies than the old tables, making RMDs a little bit lower under the new tables than the old ones. In addition, there is new IRS legislation about being required to take RMDs from inherited accounts if those inherited accounts were received after the owners started taking RMDs.

Now, to specifically answer your question. Since your mother died in 2020, after reaching her RMD required beginning date, you are required to take annual RMDs during the 10-year period under new IRS regulations issued in February. That 10-year period began in 2021. However, those new regulations have not been completely finalized as of yet. So, it’s not clear whether a 2021 RMD will be required. We are hoping the IRS will issue guidance on this issue later this year.

To get your retirement planning questions answered, visit the Prepare Institute website (www.theprepareinstitute.org) and find a retirement course or class near you.

Content is for educational and informational purposes only. It is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. You should contact your retirement and tax professional before utilizing any of the information in this article.