Retirement Account Update for 2022

Elder Law Issues Podcast

The last two years have certainly been disruptive. One thing you might not have expected to change, though, was your retirement plan. Turns out that a retirement account update for 2022 is very much in order.

You probably realize that the SECURE Act of 2019 changed many retirement rules. The best-publicized change: most beneficiaries (other than spouses) have just ten years after the owner’s death to withdraw all of the funds from an inherited IRA, 401(k), 403b or even Roth account. That’s clearly bad news for most retirement account owners. But less discussed: there’s also some good news to share.

First, there’s good news in the retirement account update for 2022. Your life expectancy just got extended! Well, most people’s life expectancy did, anyway.

For a 75-year-old IRA owner, for example, pre-2022 life expectancy was another 22.9 years — or almost age 98. Now, the IRA owner turning 75 in 2022 has been given almost two extra years to live! The current 75-year-old is (actuarially) expected to live to age 99.6 — another 24.6 years.

Want some quick illustrations?

Imagine that you turn 75 this year, and you have accumulated a $100,000 IRA. Your minimum distribution amount: $4,065 and change. But if you had turned 75 in 2019, you would have had to withdraw a little more than $300 more — and pay the additional tax. Of course, if your IRA is $1 million you can multiply those numbers by ten. And all owners of IRAs, 401(k), and most other defined contribution plans get the same benefit.

Not a huge difference, but there is some good news for 2022. There’s also some good news in the SECURE Act itself.

Chief among the good news items is that the minimum distribution requirement doesn’t even start until age 72 — up from 70.5 in previous times. Of course, 2020 was a holiday for virtually all required distributions. And that holiday extended even the five- and ten-year distribution requirements by the missed year.

The bottom line: there’s both good news and less-good news in the retirement account update for 2022. Join us for our podcast discussion of some of the changes.