This year brings a nice change to those people who are required to take minimum distributions from their IRA’s each year. You don’t have to take as much! In recognizing that life expectancies have gone up (at least prior to the pandemic), the IRS is reducing required minimum distributions.

If you are the non-spousal beneficiary of an inherited IRA, the calculation of your RMD is a bit trickier than just going to the new tables and finding your age and using that factor. If you were taking minimum distributions prior to 2022 and are using the Single Life Expectancy Table you are going to have to “reset” your age factor. This is a one-time RMD reset.

The first thing you have to remember is that you DO NOT simply use the new Single Life Expectancy based on your age in 2022.

Instead, you do go to the new Single Life Expectancy, find your age when you started taking required minimum distributions from the inherited IRA. Get that factor from the table and SUBTRACT 1 from it for each succeeding year to get to the 2022 RMD factor. (Are you confused yet?)

Let’s do an example using me. Let’s assume I inherited my father’s IRA when he passed in 2015. He was taking RMD’s at the time, so I had to continue taking RMD’s based on my life expectancy. So, to get my 2022 factor, I would go to the New Single Life Expectancy and find the factor for my age in 2015 which was 60. That factor is 27.1. From that factor, I would subtract 7. (1 for each year of 2016, 2017, 2018, 2019, 2020, 2021, 2022). So, my factor for my 2022 RMD is 20.1.

Interesting fact: Under the old tables, my RMD factor for this 2022 would have been 18.2.

If the value of the IRA for this calculation was $100,000, under the new reset, my 2022 RMD is $3690.03. Under the old rule my RMD would have been $4975.12. That’s a substantial savings!

So, if you have an inherited IRA, DON’T FORGET TO RESET!

These are the opinions of Legacy Wealth Management, LLC and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.

Mike Berry is a Registered Representative offering securities through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Legacy Wealth Management, LLC and Cambridge are not affiliated. Cambridge does not offer tax advice.

Copyright ©2022 Mike Berry. All Rights reserved. Commercial copying, duplication or reproduction is prohibited.