Aggregating Required Distributions

Friday, December 13, 2013

By Beverly DeVeny, IRA Technical Expert

Follow Me on Twitter: @BevIRAEdSlott

Not only are the holidays upon us, but it is time to make sure that required distributions (RMDs) from retirement plans are taken before year end (or before the cutoff date imposed by the IRA custodian). One question that comes up frequently is what RMDs can be added together.

Distributions from IRAs, including SEP and SIMPLE IRAs, should be calculated on each IRA, but then they can be added together and taken from any one or combination of IRA accounts. There are some potential traps here that you want to avoid.

  • You cannot combine the RMDs for spouses. Each spouse must take their RMD from their own IRA account(s).
  • You cannot combine the RMDs from owned IRA accounts with RMDs from inherited accounts. You can combine the RMDs from inherited accounts when they are inherited from the same IRA account owner.
  • When an IRA account is annuitized over life expectancy or a period of 10 years or more, the annual distribution from that account is the RMD for that account. It cannot be used to satisfy the RMD from any other IRA account.

Distributions from employer plans must be calculated on each plan and withdrawn from that plan. Employer plans cannot be aggregated – with one exception. 403(b) accounts can be aggregated following the same rules for IRAs noted above. The combined total can be taken from any one or combination of 403(b) accounts.

Under no circumstances can an RMD from one type of plan be satisfied with a distribution from a different type of plan. A 403(b) RMD cannot come out of an IRA, an IRA RMD cannot come out of a 401(k), etc.

There are no RMDs for Roth IRA account owners so there are no aggregation rules. Inherited Roth IRA RMDs can be aggregated following the IRA rules above.

If you have any questions on calculating your RMDs or on taking your distributions, it is best to consult with an IRA specialist. There is a penalty of 50% of the amount not taken if you do not take your full RMD. If you take the RMD out of the wrong type of account, you are treated as though you did not take that RMD at all. You can find a listing of Ed Slott trained advisors on our web site, www.IRAhelp.com. 
 

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