Archive for January 2022

Good News for Retirees!

For the first time since 2002, the Internal Revenue Service has updated its Uniform Lifetime Table and lowered the size of RMDs. The new tables, which now project longer lifespans, are used to calculate RMDs from individual retirement accounts, 401(k)s and other retirement savings vehicles each year. This means that starting in 2022, retirees can keep more money in a tax-deferred retirement account.

What Are RMDs and How Are They Calculated?

Traditional IRAs and 401(k)s allow retirement savers to defer taxes until they withdraw money from their accounts. This allows the money to continue to grow at a faster rate over time. The IRS does, however, require you to withdraw a specific amount each year once you reach a certain age. This limits you from keeping the funds in a retirement account forever.

The following accounts are subject to RMDs: Traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k) plans, 403(b) plans, 457(b) plans, profit sharing plans, other defined contribution plans. Roth IRAs are not subject to RMDs.

To calculate your RMD, first, look up the market value of your retirement account as of Dec. 31 from the previous year. Then, divide that value by the distribution period figure that corresponds with your age on the IRS Uniform Lifetime Table. For example, a 72-year-old retiree with $500,000 in her IRA would divide $500,000 by her distribution period figure, which is 27.4. As a result, she would be required to withdraw at least $18,248 from her IRA in 2022.

Why The New RMD Formula Is Good For Retirees

The IRS has raised the average life expectancy from 82.4 to 84.6. With a higher life expectancy, retirees will likely need to spread their assets over more years. Due to the need to cover additional years, RMDs that begin in 2022 will be less than they were under the previous formula.

Since smaller withdrawals will be required each year, more of your retirement assets can remain in an IRA, 401(k) or tax-deferred account. Smaller RMDs will lessen your tax liability and could potentially drop you into a lower tax bracket – good news for retirees or those subject to RMDs.

Under the previous Uniform Lifetime Table, a 72-year-old with $500,000 in her 401(k) would have been required to withdraw $19,531 ($500,000/25.6) during her first year of taking RMDs. That’s $1,283 more that would have been subject to income taxes compared to the smaller minimum withdrawal required under the revised table.

Meanwhile, a 72-year-old with $2 million in his retirement account would have been required to withdraw $78,125 under the older formula ($2 million/25.6). However, the updated formula results in an initial RMD of just $72,992 ($2 million/27.4), meaning this retiree would keep an extra $5,133 growing tax-deferred in his retirement account.

In summary, for the first time since 2002, the IRS updated the actuarial tables that determine the amount of money a person must withdraw from their IRA or 401(k) at a certain age. The SECURE Act changed the RMD age from 70.5 to 72 and the updated Uniform Lifetime Table has lowered the size of RMDs. This allows you to keep more of your assets in a tax-deferred account. Remember, RMDs are only the minimum amount that must be withdrawn each year. You can always withdraw more from an IRA or 401(k), but keep in mind: the larger the distribution, the larger your tax bill.

Massachusetts Credit Unions 2022 College Scholarship Program

If you or someone you know plans to attend college this year after graduating from high school, you’ll be happy to know that AllCom Credit Union is offering eligible members a chance to win a $1,500 scholarship to help cover the expanding costs associated with your college education.

The Credit Union College Scholarship Program, supported by Massachusetts Credit Unions and our statewide campaign, Better Values – Better Banking, is funding six (6) $1,500 scholarships that will be awarded to six (6) high school graduates chosen as winners from across the state. 

2022 College Scholarship Application

Application deadline: April 8, 2022

Scholarship Eligibility
1. Eligibility is limited to high school seniors who will be enrolled in an undergraduate college degree program during the 2022-2023 academic year.

2. Applicant or parent/guardian must be a member of the sponsoring credit union.

3. The credit union must be a member in good standing with the Cooperative Credit Union Association.

4. Each applicant must complete a current scholarship application form and submit it with the other required material to the sponsoring credit union.

5. Each credit union will select its top 3 applications and forward them to their chapter president. They must be accompanied by a cover letter from the sponsoring credit union CEO verifying that each applicant and/or parent/guardian is a credit union member.

Each chapter will select its scholarship winner evaluating each applicant on the same criteria the credit unions will be using grades, essay and extracurricular/community activities.

Students must submit the following items with their completed applications. All items requested must be received in order for the application to qualify for consideration.

1. Completed printed application.

2. An academic transcript of grades.

3. A typewritten essay of at least 250 words describing what you career you wish to pursue when you complete your education and why.

4. A detailed list of extracurricular/community activities and/or volunteer activities.

If you have any questions, please call Erin Harvey, Branch Manager at 508.754.9980.