Retirement Savings Required Minimum Distributions (RMD's) - John R. Dundon II, Enrolled Agent
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Retirement Savings Required Minimum Distributions (RMD’s)

Retirement Savings Required Minimum Distributions (RMD’s)

Many people turning 70 see themselves in the prime of their life. A pervasive problem among this group is this idea of a Required Minimum Distribution (RMD) from their retirement savings accounts. Many people do not like to withdraw money from their retirement accounts particularly with investments still negligibly recovering from the crash of 2008. I have noticed that there is a good deal of confusion over RMD’s and many investment professionals seem to be having a problem expressing how they actually work. In fact I had an experience with one today that prompted me to research and recite the tax code to win an argument and as such I blog about it.

According to Reg. §1.401(a)(9)-8, you must have a separate determination of your Required Minimum Distribution (RMD) from each of your employer sponsored retirement plans including 401(k), profit sharing, defined benefit, etc. Each of these RMDs must be withdrawn from their respective accounts annually after you reach the age of 70 1/2.

HOWEVER with Individual Retirement Accounts (IRA’s) including SEP’s and SIMPLE’s even though you must have each separate RMD calculated by account, Reg. §1.408-8 allows you to aggregate the IRA RMDs and draw the funds out of a single IRA or combination of IRA accounts. In other words you do not have to take RMD’s from each and every IRA you own as long as you withdraw in total from any particular IRA account or combination of accounts an amount equal to the calculated RMD for the combined total of all the IRA’s.

The lesson learned here is that if you have multiple types of retirement savings investment accounts you can expect multiple RMD’s.  If you have multiple IRA’s you can aggregate the RMD’s and take the withdrawal from any account or combination of IRA accounts you choose as long as the RMD threshold is met.