After a year-long debate, the IRS has approved most of the tax regulations it proposed in January 2001, including an extension in life expectancy tables. The updated tables will lower the minimum required distribution withdrawal amount from tax-deferred retirement accounts by adding a little more than a year to the life of a 75-year old. However, the nominal extension (the tables have not been adjusted for more than 20 years) has some observers asking if it really matters.
"With all of the advancements in technology and how much longer people are living, I was surprised we only earned a year," says Ed Slott, CPA and author of Ed Slott's IRA Advisor. It's not a big change, he says, but neither were the income tax rebates the government handed out last year.
"Most of the changes were made to make things easier," he says. "I think planners will be happy with them as they sink in."
Even though the new regulations do not go into effect until next year, taxpayers have the option of applying them to their 2002 distributions. Slott suggests advising affected clients to use the new rules. "Saving clients a little bit of money is still saving money," he says.
