This week I’m talking about Required Minimum Distributions, otherwise known as RMDs. When you reach the age of 70 ½, you have to start distributions from your IRA, 401k, and other qualified accounts by the end of each calendar year with rare exceptions. 

It’s a common source of confusion among my clients so I’m covering the questions I get asked most often about RMDs to help you better understand the complicated rules about those mandatory withdrawals. 

Today’s RMD question is: Can I aggregate RMDs from multiple accounts. 

The answer is, yes you can, and often you should consider doing so as well. But it wouldn’t be a good RMD rule without some exceptions, so here’s an important one: 

For some types of accounts, like 401ks, if you are 70 ½ and you have multiple 401k accounts, you can’t aggregate those RMDs together. You have to take RMDs individually from each account. This is part of the reason it makes sense to consolidate your old 401k accounts when you change jobs or retire into an IRA, because it simplifies everything into one account and you won’t be required to keep track of and take multiple RMDs from multiple 401k accounts. 

But let’s say you’ve already aggregated your 401k accounts into IRAs and now you have 2 IRA accounts. It doesn’t matter if you have 1 IRA or 10 different IRA accounts. As long as you take the total required minimum distribution from your IRAs, it doesn’t matter if you take it from each account individually or aggregate those withdrawals from just one IRA account. 

Many of my clients have more than one IRA and there are several reasons to consider aggregating RMDs from multiple accounts into one RMD: 

1. By taking funds from just one account, it’s often an opportunity to rebalance the portfolio since you can pick and choose what to sell and from which account. 
2. It’s cleaner and easier for most people to just receive one deposit or one check in the mail compared to 2 or 3 or more. 
3. If you have some underperforming dogs with poor future prospects in your portfolio, selling a bad investment to satisfy your RMD provides a good excuse to move on without liquidating your higher quality investment holdings. 

 

That’s it for today. If you haven’t already left a review in Amazon or iTunes for the One Minute Retirement Tip, can I ask a favor of you to go do that right now? It just takes a minute and it helps to spread the word, and helps other people find this podcast. 

Thanks for listening! My name is Ashley Micciche and this is the One Minute Retirement Tip.

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