Double-Edged Sword of Aging

Clearly another topic with multiple sequels, aging has its positives and not-so-positives. Recently a slight positive – from the IRS.

Its Life Expectancy Tables, otherwise known as the “IRS Uniform Life Tables I, II and III”, have adjusted the American life expectancy UP by approximately two more years. That means that RMD amounts, or required minimum distributions, from IRA, 401k and other retirement accounts will be slightly lower when calculated. These RMDs count as taxable income so even a small break will be welcome!

Increasing longevity is a compelling reason to develop or maintain a well-laid out long-term savings plan.

In addition, as part of a law put into effect in 2020 to reflect this longer life expectancy, the age for RMDs to begin was moved UP to age 72 from age 70½. Assets in qualified accounts can continue to grow tax deferred for an extra almost 2 years. Although in conjunction with an attentive financial adviser and tax professional, it may make sense to begin removing monies from the IRA and IRA Rollover accounts sooner than RMD age, especially for savers with large account balances over, say, $500,000. Please ask me about this.

On the other side of the “seesaw” of life is the challenging fact that in our aging society, there is a seriously growing number of caregivers – those giving care – who are over age 65 and age 75. The Wall Street Journal reports that nearly 20% of unpaid at-home family caregivers are age 65 or over and that 7% of caregivers are over age 75!*

To keep this potentially sensitive topic short and sweet, increasing longevity is a compelling reason to develop or maintain a well-laid out long-term savings plan. One balancing factor, unfortunately, is that the pandemic may have slightly shortened life expectancies so we may see the IRS Tables adjusted back “down” to where they were prior to the 2020 increases. Still, longevity and aging remain major factors in financial planning.

*Clare Ansberry, WSJ, 2/9/2022.

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