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Remember how RMDs for a particular age were supposed to go down in 2021, but the changes were pushed back to 2022 in November? https://www.kitces.com/current-vs-new-uniform-lifetime-table...

Well, there is a new CDC report that came out that said during the first 6 months of 2020, average life expectancy in the US dropped by a year https://www.upi.com/Health_News/2021/02/18/CDC-US-life-expec... Since there were even more deaths in the last half of 2020, I would expect that there would be at least a 2 year drop, if not a 3 year drop, in life expectancy for all of 2020.

Given that, I wonder how long the new tables will remain in place, if they actually get implemented at all.

AJ
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there is a new CDC report that came out that said during the first 6 months of 2020, average life expectancy in the US dropped by a year

No the average life expectancy did not change. What happened is that an unusually large number of people died suddenly.
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RMD is calculated by dividing by life expectancy in years, as I recall.

So shorter life expectancy would mean that required RMD payment increases.
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And that's in addition to the effect of your age increasing.
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No the average life expectancy did not change. What happened is that an unusually large number of people died suddenly.

Well, according to the CDC, the all of those people dying suddenly DID change life expectancy. https://www.cdc.gov/nchs/data/vsrr/VSRR10-508.pdf

In the first half of 2020, life expectancy at birth for the total U.S. population was 77.8 years, declining by 1.0 year from 78.8 in 2019

AJ
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RMD is calculated by dividing by life expectancy in years, as I recall.

Yes, if you look at the Kitces article, it shows both sets of tables.

So shorter life expectancy would mean that required RMD payment increases.

The new table has larger numbers for the same age, meaning the distributions will be smaller. But if the life expectancy has decreased, I wonder if they will end up either not implementing the new table, or going back to the old table after a couple of years.

AJ
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Keep in mind that RMDs are a function of tax law and only loosely based on science. They change when and if Congress decides to change them. Historically, I believe they’ve only been changed once in the last three or four decades.

I doubt the one-time affects of the pandemic will show up in RMDs.

—Peter
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I doubt the one-time affects of the pandemic will show up in RMDs.

Except that higher RMDs (i.e. lower life expectancy) means more revenue. And there is definitely a need for more revenue to pay what's already been spent.

It would be an easy way to generate, say, 10% more tax revenue from RMDs, to just say - well, the life expectancy went back down, so we're just not going to change from the old tables.

AJ
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Doubt they could change it for this year - 2021, but this fall they could come up with new table and change it for year 2022....simple change the table you use.

It's probably a one year blip.....but, heck, it will raise tens of millions, if not more, in extra revenue as you have to take out another 0.x percent more next year.

Of course, that revenue all depends upon what your IRA/401K value is on Dec 31, 2021...and no one has a crystal ball for that.......

this year, record high levels so lots more $$$$ collected by the fed as folks have to take out more.....

Even if they change the table to the shorter life span in the fall, and hope for more bucks next year....it might not happen if the stock market doesn't cooperate with them.


t.
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Doubt they could change it for this year - 2021

They don't need to. As already mentioned upthread, in Nov, 2020, they delayed the implementation of the new tables until 2022. They were originally supposed to go into effect for 2021.

this fall they could come up with new table and change it for year 2022....simple change the table you use.

Or just decide not to change to the new table.

AJ
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Except that higher RMDs (i.e. lower life expectancy) means more revenue. And there is definitely a need for more revenue to pay what's already been spent.


But the RMD table doesn't matter to most people. 80% take more than the RMD, only 20% take just the RMD.

t would be an easy way to generate, say, 10% more tax revenue from RMDs, to just say - well, the life expectancy went back down, so we're just not going to change from the old tables.

Well of course it would not amount to any significant increase in tax revenue.
And, really, does anyone still believe that the government pays any attention to revenue when they decide spending?

Thirdly, the RMD levels are set by fiat. They can and will do whatever they want, regardless of any life expectancy data.
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Rayvt: But the RMD table doesn't matter to most people. 80% take more than the RMD, only 20% take just the RMD.

I have often wondered about that. I'm one of the 20%. No other source of income (OK, a bit from SS), good health: I want it to last as long as I do....

Is there a site you can refer me/us to that shows statistics like that. Another thing I've often wondered is what "most people" have in their IRAs from which to withdraw their RMDs. What's the median value of IRAs by the time folks reach their RMD years?

mathetes
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Rayvt: But the RMD table doesn't matter to most people. 80% take more than the RMD, only 20% take just the RMD.

I'm curious about where this data originated. The EBRI published a report last year regarding the IRA Database. One of the nuggets in the paper's summary regarding withdrawals was: "One-quarter of IRA owners ages 71 or older were found to have withdrawn an amount from their Traditional IRA in excess of their RMD."

At 76, I'm one of the 75% over the age of 71 that only withdraws the RMD from my IRA. I want to stave off the increase in Medicare premiums as long as possible.
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I just googled it.

Who knows how true it is. I think only the IRS would know, since they know IRA end-of-year balances and IRA withdrawals. Don't know if or where they publish that data.
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mathetes:"Another thing I've often wondered is what "most people" have in their IRAs from which to withdraw their RMDs. What's the median value of IRAs by the time folks reach their RMD years?"

probably an interesting but useless statistic.

If you've been living fine on $25,000 in your trailer home in rural AR, making $30,000, working for Walmart and stashing some cash in their 401K program, you don't need a giant balance in your 401K/IRA to live on. SS will provide a good chunk of your income.

If you've been spending $150,000 to live in NYC in your now valued townhouse of $800,000 with tax bill of $20,000 a year, 13% overall NY state and NYC city tax load.....while making $200,000 a year...and stashing cash in your company 401 to the extent possible..... your SS will be small compared to your needs. You might have 7 figure IRA or maybe healthy 7 figures.....

so...it's all relative to what they've been earning, what they need in retirement, and what other income sources they have such as pensions - maybe from previous jobs....

t.
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Except that higher RMDs (i.e. lower life expectancy) means more revenue. And there is definitely a need for more revenue to pay what's already been spent.

I wonder if anyone is calculating the revenue to be generated over the coming years from the inherited (by non-spouse) IRAs that have to be drawn to zero over the ten years following the deaths. It was all going to be taxed someday, but someday is coming sooner and some will be skewing the incomes of currently working people into painfully higher brackets.
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mathetes asks,

Is there a site you can refer me/us to that shows statistics like that.

</snip>


The Employee Benefits Research Institute (ERBI) has a couple of research papers on the subject. The people who aren't spending enough to take more than their RMD are the "discretionary spenders".

How Do Retirees’ Spending Patterns Change Over Time?
https://www.ebri.org/docs/default-source/ebri-issue-brief/eb...

</snip>


Older Americans’ Spending Profiles: One Size Does Not Fit All
https://www.ebri.org/docs/default-source/ebri-issue-brief/eb...

</snip>


intercst
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tele writes,

If you've been spending $150,000 to live in NYC in your now valued townhouse of $800,000 with tax bill of $20,000 a year, 13% overall NY state and NYC city tax load.....while making $200,000 a year...and stashing cash in your company 401 to the extent possible..... your SS will be small compared to your needs. You might have 7 figure IRA or maybe healthy 7 figures.....

</snip>


Tele, for an engineer you're completely FOS when it comes to numbers.

I happen to know that real estate taxes in New York City are actually comically low compared to other parts of the country.

Here's a $750,000 home in Brooklyn with a $3,000 annual property tax bill. That's not unusual.

https://www.zillow.com/homedetails/83-Weldon-St-Brooklyn-NY-...

intercst
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mathetes:"Another thing I've often wondered is what "most people" have in their IRAs from which to withdraw their RMDs. What's the median value of IRAs by the time folks reach their RMD years?"

telegraph: Probably an interesting but useless statistic.

If you have a passing interest in how much a 70-75 year old has in their IRA, you can pop-over to the Don't Quit Your Day Job web site (https://dqydj.com/retirement-savings-by-age/) for an estimate.

How useful the information is depends on your income range while contributing to your 401(k)/IRA.
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intercst:"I happen to know that real estate taxes in New York City are actually comically low compared to other parts of the country."

well, try San Francisco then.....if you bought 1 year ago.....or San Jose.....

and your cost of earthquake insurance there? $10,000 or $15,000 a year with $10,000 deductible?



My sis lives in suburban Wash DC....$7000 a year real estate bill on her house. The summer house is $13,000 a year in upstate NY. $20,000 a year in real estate taxes from her retirement income each year and naturally going up. She's now 72 going on 73.



Here, in TX, I'm loafing along at $4000 a year and it won't go up thanks to over 65 limiting.....maybe a hundred a year....but that's it...it's capped...but others paying $6500 for same value house.......who aren't 65.....


t.
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"
If you have a passing interest in how much a 70-75 year old has in their IRA, you can pop-over to the Don't Quit Your Day Job web site (https://dqydj.com/retirement-savings-by-age/) for an estimate."


Useful for also only partly so.

What that ignores is the value of pensions - those who stand to get pensions that replace 50-60% of their income, plus social security....plus any other savings.....have an income stream that is many times what they personally saved on the side.

What it ignores is the value of SS....which for many lower income folks can provide a third of their income....or more - in retirement.

For someone maxed out getting $30,000 a year in SS, and maybe their spouse getting the same....that's $60,000 a year....if they have pensions, maybe now well over $100,000 a year.....before they touch any personal savings or IRAs.....

t.
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Well of course it would not amount to any significant increase in tax revenue.
And, really, does anyone still believe that the government pays any attention to revenue when they decide spending? - rayvt


----------------

Exactly, the party out of power berates the other for their wasteful spending, the debt is higher than ever and is ruining us, and so on.

Periocially the parties exchange places, and the complaining and the spending continue unabated. The circle of life for politicians.
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I wonder if anyone is calculating the revenue to be generated over the coming years from the inherited (by non-spouse) IRAs that have to be drawn to zero over the ten years following the deaths. It was all going to be taxed someday, but someday is coming sooner and some will be skewing the incomes of currently working people into painfully higher brackets.

Yes, the CBO did. The revenue was used to offset the increase in the RMD age from 70 1/2 to 72 https://www.cbo.gov/system/files/2019-04/hr1994.pdf

AJ
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and your cost of earthquake insurance there? $10,000 or $15,000 a year with $10,000 deductible?</B?

The cost of Earthquake insurance in CA varies greatly, easily a factor of 5 depending upon the neighborhood, even with that $10k annual cost is high.

Deductible is 5-25% so a 5% deductible at $10k is $200k building, which doesn't exist in coastal CA, maybe $50k deductible is a good start.
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I don't know about Coastal California, but the only home I'd consider on the Oregon Coast is a fully-fueled RV sitting on a concrete pad with utility hookups.

https://en.wikipedia.org/wiki/Cascadia_subduction_zone

intercst
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intercst:"I don't know about Coastal California, but the only home I'd consider on the Oregon Coast is a fully-fueled RV sitting on a concrete pad with utility hookups."

Which might work until the Cascadia Earthquake hits at magnitude 9.0 and the escape roads instantly turn into 'impassible' due to buckled pavement.

Then the tsunami happens with a 1200 foot high wall of water which travels miles inland. That, and 150 mph winds......

Might as well throw in scads of murder hornets suddenly appearing.....


t.
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telegraph: Useful for also only partly so.

What that ignores is the value of pensions - those who stand to get pensions that replace 50-60% of their income, plus social security....plus any other savings.....have an income stream that is many times what they personally saved on the side.


The original question was how much an individual might have in their IRA when RMD withdrawals started.

The site has income calculators that take into consideration income from pensions, Social Security, other Government transfers, dividends, and interest plus 401(k)/IRA withdrawals. These might address your concerns.

Also, the site has net worth calculators that allow you to include personal savings, investment account values in addition to your 401(k)/IRA account values.

I suspect many readers of this board have sufficient income from Social Security, pensions, dividends, and interest that RMD withdrawals are simply transferred to a taxable investment account and re-invested.
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McC:"The original question was how much an individual might have in their IRA when RMD withdrawals started."

Well, no...the original post was about longevity with COVID and possible changes to the RMD withdrawal tables



McC:"The site has income calculators that take into consideration income from pensions, Social Security, other Government transfers, dividends, and interest plus 401(k)/IRA withdrawals. These might address your concerns.

Also, the site has net worth calculators that allow you to include personal savings, investment account values in addition to your 401(k)/IRA account values."

well, that's all well and good, but when you are worried only about the dollar values of IRA/401K at RMD age.....it's a interesting statistic but useless to determine how well most will live.

Millions and millions have pensions.......(and may have stashed little). Several million federal workers - a few million local municipal, county, city, state workers - and probably 10 million or more public school system teachers. Garbage collectors in NYC. etc

Now tens of millions don't...... but until you include the imputed value of pensions into their 'life savings and annual income stream ' ..... comparisons are relatively useless to compare group A to group B.


t
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doubt the one-time affects of the pandemic will show up in RMDs.

Agree.

There is a statistic that weights long term trends to anomalous events causing statistically significant positive or negative deflections in a rolling average. Sorry, can't remember it's name or how it is calculated. But even so, the decision to slightly change (increase) the RMD divisor or the beginning age likely has much more to do with politics than science, as the current administration is showing us.

BruceM
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I wonder if anyone is calculating...

Yes, the CBO did.


Thanks for that.

I was thinking of the impact of Covid deaths specifically but failed to be explicit. The linked report was from 2019.
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I was thinking of the impact of Covid deaths specifically but failed to be explicit.

Sorry, I haven't seen anything on the impact of COVID deaths on RMD revenue, nor on SS - which is another thing I haven wondered about. Currently getting less in payroll taxes but also having to pay out less in benefits, both currently and likely in the long run.

AJ
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Any suggestions and info - did the RMD go down for 2020 - I have to get that number and then some guidance on how to invest it in my inherited IRA - REITS, Dividend stocks, Growth stocks, not sure if an article to read or hope to get question answered on the weekly MF show. I am 57...CindyG aka Cinstocks, Fool ON!
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did the RMD go down for 2020

No, as originally stated, RMDs were scheduled to start using the new tables (which would cause them to go down) starting Jan 1, 2021, and then the change got delayed until Jan 1, 2022.

Also, if you are looking to take a 2020 RMD, you have missed that window. RMDs are based on calendar year, so you needed to take the RMD by Dec 31, 2020 for it to be a 2020 RMD. If you have missed a 2020 RMD, then you will need to get a waiver from the IRS or you will pay 50% of the RMD as a penalty.

I have to get that number and then some guidance on how to invest it in my inherited IRA
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I am 57


I think you're confused. You cannot put any more money INTO an inherited IRA. Generally, you need to take money OUT OF an inherited IRA. How much you need to take out and over what time period depends on a few things:
- was the decedent married to you at the time they died? If so, were you the sole beneficiary?
- when did the decedent die?
- how old was the decedent when they died?

If they were married to you at the time they died, and you are the sole beneficiary of the IRA, then you can treat the IRA as your own, so it's no longer an inherited IRA. But if that's the case, at 57, you won't be able to take any money out of the IRA without paying a penalty until you're 59 1/2. So if you need to take money out of it, then you should continue to treat it as an inherited IRA.

If the decedent was not married to you at the time of their death, then you have no choice - it's an inherited IRA and you need to follow the rules for that.

If the decedent died on or before Dec 31, 2019, then you either needed to start taking RMDs within 1 year of their death, or you can disburse the entire account within 5 years of their death. (As mentioned above, there is a 50% penalty on the amount that should have been taken as an RMD, so if you missed that deadline, you would either need to ask the IRS for a waiver of that penalty or you could decide to use the 5 year and done rule.) If they were over 70 1/2 at the time of their death, then the RMD is based on their age, . If they were under 70 1/2 at the time of their death, then the RMD is based on your age at the time they died. RMDs are calculated using the tables in 590-B. Here's a link to the 2019 590-B, since the 2020 590-B hasn't been published yet https://www.irs.gov/pub/irs-prior/p590b--2019.pdf

If the decedent died on or after Jan 1, 2020, then there are no RMDs, but you have 10 years to completely disburse the account.

AJ
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Cindy G

If you find this confusing and intimidating, you may want to seek the help of a fee-only CFP living near you that charges by the hour. This person can sit with you, explain the RMD rules for inherited IRAs and how they apply to you, and then make recommendations on the best way to meet them, and then help you set this up. I'll cost you a couple/three hundred bucks or so but it'll get you started in the right direction.

You can find such planners at the Garrett FP network at https://www.garrettplanningnetwork.com/

Forbes also published a list of hourly planners, but don't know how they came by it or the credentials of the planners. https://www.forbes.com/sites/baldwin/2019/10/13/hourly-plann...

note: I have no affiliation with either of these.

BruceM
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