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How Do RMDs Work with Multiple IRAs?

A reader writes in, asking:

“This is my first year taking an RMD. I know it’s based on my life expectancy and my IRA balance and I’ve read that I need to combine my IRA balances. Does that include Roths? And does it include my wife’s IRAs? (She isn’t yet RMD age…)”

Firstly, your spouse’s accounts are not included for purposes of calculating your own required minimum distributions. Nor are Roth IRAs included, because non-inherited Roth IRAs do not have required minimum distributions.

Combining Different Types of Accounts

RMDs from non-Roth IRAs can all get bundled together. That is, after calculating the RMD for each of your non-Roth IRAs (including traditional IRAs, rollover IRAs, SEP IRAs, and SIMPLE IRAs), you can then add up all of those RMDs and take that total RMD from any combination of those accounts.

Employer-sponsored defined contribution plans — such as a 401(k) — work differently than IRAs. With them, you must calculate your RMD from each plan and take it from that plan. (Exception: If you have multiple 403(b) plans, you can combine the RMDs from those plans and take it from either of the 403(b) plans — much like you can do with IRAs.)

Let’s Look at an Example

Betty is 72 years old and married. She has a traditional IRA and Roth IRA at Vanguard. She also has a rollover IRA at Fidelity and a SEP IRA at Schwab. In addition, she has two 401(k) accounts and two 403(b) accounts from previous employers.

  • When calculating her RMDs, Betty does not take into account her husband’s accounts. (If he’s reached age 70.5, he’ll be calculating and taking his own RMDs, which, in turn, will not be affected by Betty’s account balances.)
  • Betty’s Roth IRA is irrelevant because no RMDs are required from Roth IRAs (unless they’re inherited).
  • Betty will calculate RMDs for her traditional IRA at Vanguard, her rollover IRA at Fidelity, and her SEP IRA at Schwab. These RMDs can be combined and taken from any of the three accounts or from some combination of the three.
  • Betty will calculate an RMD from her first 401(k) account, and she must take that RMD from that account.
  • Betty will calculate an RMD from her second 401(k) account, and she must take that RMD from that account.
  • Betty will calculate RMDs from each of her 403(b) accounts. She can then combine those RMDs and take the total RMD from either account, or split it up however she chooses between the two accounts.

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Comments

  1. Mike a nice explanation of a very complex topic. Much room for error here, especially in a scenario even close to the complexity of the example you used with multiple accounts/types of accounts.

  2. Pennybags says:

    Great post! My wife has an inherited traditional IRA and an inherited Roth IRA. Next year, she will be required to take a required minimum distribution based on her life expectancy. Does the RMD need to be taken from each account separately or can the amounts in each account be combined and the RMD taken from only one account?

  3. Pennybags,

    I believe with inherited accounts, you are supposed to take the RMD from the specific account in question. But, I’m not 100% certain about this, and at the moment I’m having trouble finding any authoritative source that says one way or the other.

    Edit: Even if you can combine RMDs from inherited accounts of the same type (e.g., two inherited Roth IRAs), I do not believe you can combine RMDs from inherited accounts of different types (e.g., Roth vs. traditional).

  4. @Pennybags Mike is right, based upon my experience in working with several clients and their inherited IRAs these distributions are separate from any other account and must come from that account. It is my understanding (but I’ve never encountered this) that this would be the case even if you had multiple inherited IRAs. What I do not know is how this works if the deceased was not taking RMDs prior to their death and the RMD is now based upon the beneficiary’s age.

  5. Multiple inherited RMDs – Unless the two deceased folk have died during the same year, the divisor will not be the same.
    To calculate the first year RMD you take your age this year and 12/31 balance from prior year. Referring to Table 1 in Publication 590 you get the divisor. But – next year you do not re-visit the 590, you subtract 1. Upon a new inheritance, you refer to the 590 to get your starting divisor for the second inherited IRA. The two divisors will not be the same. A 40 year old’s life expectancy is not 10 years less than a 30 year old.

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