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December 20, 2011

RMDs for Multiple Retirement Accounts

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If you have multiple retirement accounts, you might be able to take the required minimum distribution (RMD) for multiple of those accounts from only one account. This is commonly referred to as RMD aggregation. If you choose to aggregate your RMDs, you must exercise extreme caution, as improper aggregation can result in your withdrawing less than the required amount. If you withdraw less than the required amount, you will owe the IRS a 50% excess accumulation penalty.

  • If you have multiple traditional IRAs, SEP IRAs and SIMPLE IRAs, the RMD for these IRAs can be totaled and taken from one of more of these IRAs
  • If you have multiple 403(b) accounts, the RMD for these 403(b) accounts can be totaled and taken from one of more of these 403(b) accounts
  • RMDs cannot be aggregated for qualified plans, such as pension, 401(k) and profit sharing plans
  • RMDs for an IRA cannot be taken from a 403(b) or vice versa.
  • RMDs for inherited accounts cannot be taken from non-inherited accounts and vice versa.

Case Study 3: Multiple Accounts

Tim has two retirement accounts. His RMD for this year is as follows:

  • Traditional IRA : $10,000
  • 403(b) : $10,000

Total $20,000

Tim took a distribution of $20,000 from his 403(b) account by his RMD deadline. He did not make any withdrawals from his IRA by his RMD deadline.

Even though Tim withdrew $20,000, he owes the IRS an excess accumulation penalty of $5,000 (50% of the RMD for the traditional IRA), because he did not satisfy the RMD for the IRA (withdrawals from a 403(b) cannot be used toward satisfying RMD for an IRA and vice versa).

This is just a high level overview. There are more rules to consider.

Tip provided by Denise Appleby

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

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