Combining RMDs Must Be Limited to the Same Type of Retirement Plan
If you have multiple retirement accounts, you are allowed to combine and withdraw the multiple RMDs from one retirement account; however, only RMDs from certain types of retirement plans can be combined. The following combinations are permitted:
- If you have multiple Traditional IRAs, you may calculate each IRA’s RMD, combine these RMDs, and withdraw the total amount from one Traditional IRA.
- If you have multiple 403(b) accounts, you may calculate each 403(b)’s RMD, combine all these RMD amounts, and withdraw the total amount from one 403(b).
- If you have multiple inherited/beneficiary IRAs from the same decedent, you may choose to combine life-expectancy distributions for those inherited IRAs and withdraw the total from one inherited IRA.
You may not combine the RMD amount for different types of retirement plans. The following are examples of combinations that are not permitted :
- You may not combine the RMDs for multiple qualified plans. Each RMD must be withdrawn from the respective qualified plan.
- You may not combine RMD amounts for different types of plans. For instance, an RMD amount for a 403(b) account may not be withdrawn from a Traditional IRA or vice versa, and the RMD for a 403(b) account may not be withdrawn from a qualified plan.
- RMD amounts for inherited/beneficiary IRAs may not be withdrawn from Traditional IRAs that you own.
Brian inherited an IRA from his father Tom. The RMD amount for the inherited IRA is $12,000. Brian has his own IRA that he funded himself with contributions from eranings and rollover contributions, and this year the RMD amount for his own IRA is $20,000. Brian cannot combine the two RMD amounts and withdraw from only one. Each RMD must be withdrawn from its respective account because an inherited IRA and a contributory (or rollover IRA) are considered different types of plans.
In fact, if Brian had inherirted an IRA from his dad and also from his mom, you may not combine distributions for those inherited IRAs (similar to the rule for mutiple qualified accounts)
If you err in combining RMD amounts for different types of retirement plans, an RMD deficiency will result for the retirement plan from which you withdrew no RMD. For instance, say the RMD for your qualified plan is $20,000 and the RMD for your Traditional IRA is $10,000. If you withdraw $30,000 from the Traditional IRA and make no withdrawal from the qualified plan account, you will not have satisfied the RMD for your qualified plan account and will owe the IRS an excise tax amount of $10,000 (50% of the shortfall).
Aggregation of RMDs
If you participate in more than one qualified plan, your RMD for each plan must be determined separately, and each applicable amount must be distributed from the respective plan. RMD amounts for qualified plans cannot be distributed from IRAs and vice versa. However, if you own multiple IRAs or multiple 403(b) amounts, you may aggregate the RMD for all similar plans (Traditional IRAs or 403(b)) and then take the amount from one account of each type of plan.
Brian, age 72, has two contributory IRAs and two 403(b) accounts. Brian also has assets in a ex-employer qualified plan and a 401k plan with a past employer. The RMD amount for each of Brian’s retirement accounts is the following:
IRA No.1 -$15,000
IRA No.2 – $8,000
403(b) No.1 – $6,000
403(b) No.2 – $4,500
Profit sharing account – $10,000
401(k) account – $12,000
Here are Brian’s options for his various accounts:
- For IRA No.1 and IRA No.2, Brian may either distribute the amount from each IRA or total the amount and distribute it from one IRA.
- For 403(b) No.1 and 403(b) No.2, Brian may either distribute the amount from each 403(b) account or total the amount and distribute it from one 403(b) account.
- The amount of $10,000 must be distributed from the profit sharing plan account and the amount of $4,500 must be distributed from the 401(k) account. These amounts cannot be combined.