Aggregation of IRA’s for distribution purposes
Taxpayer has two IRA accounts.
One account contains non-deductible contributions made yearly over long periods of time and the other IRA account was opened by direct rollover about 5 years ago from a previously terminated corporate defined benefit plan (no non-deductible contributions have since been made to this account). Both accounts have been maintained as distinctly separate accounts.
Although taxpayer has not reached his RMD age, he desires to withdraw from his IRA for living expenses. He is over age 59-1/2 so no penalties would apply.
Does it matter from which IRA account he withdraws? Or do both accounts have to be aggregated for purposes of calculating the taxable portion of any distribution?
If aggregation applies, is there any reason why both accounts should not be combined?
Thank you for your reply
Permalink Submitted by Alan - IRA critic on Mon, 2023-05-15 15:05
All the accounts must be aggregated as if one combined account. Therefore, it does not matter which account is used to fund distributions, and these accounts could be combined into a single account. The only factor involved in that decision is whether the total value exceeds 1.5mm, in which case the rollover account might be kept separate for creditor protection purposes because the rollover account is not subject to the 1.5mm limit.