When I am 70-1/2, where will the RMD amount be taken from?
I have several IRA's--traditional and SEP. I have not rolled over older, smaller account balances into the largest one.
The IRS requires the amount you take out for RMDs, not specifically which account they are taken from. To make this a simpler process you might want to consider consolidating some of the accounts into lesser accounts. This would provide less things to keep track of and less opportunity to miss an RMD and get hit with an IRS penalty.
Before you consolidate the accounts make sure you are aware of any cost of fees to move the accounts, and look for a company that will help you calculate the RMD amounts for you. Many companies will also allow you to set up automatic RMD withdrawal from your account, so you don’t have to spend much time thinking about it or trying to calculate the correct amounts yourself.
For more specifics consult with your financial adviser and tax professional. For some tips to make good use of your RMD check out the full article "RMD Tips : Maximize your Retirement Savings"
Hope this helps,
Securities and advisory services offered through National Planning Corporation (NPC), Member FINRA, SIPC, a Registered Investment Advisor. Trilogy Capital Trilogy Financial and NPC are separate and unrelated entities. The opinions voiced in this article are for general information only and do not constitute an endorsement by NPC. NPC does not provide tax advice. Financial Planner LA Blog
Good question that many are asking. Technically each IRA/retirement account will have it's own RMD calculation. With that said, you can add all those RMD amounts up and then take that amount out of one IRA, letting the others accounts stay invested. You may want to consider rolling over your IRA's to consolidate them and simplify the RMD process moving forward.
Below is an excerpt from a recent article I wrote on Rollovers:
"Here is a clear and simple explanation of what a 401(k) rollover is and what your options are when you leave or retire from your job. According to FINRA, people have 4 choices when they start a new job or retire:
- Leave the money in your former employer’s plan
- Roll over the money to your new employer’s plan, if the plan accepts transfers
- Roll over the money into an individual retirement account (IRA)
- Take the cash value of your account"
To read the full article please click here.
Please consider me a resource if you have additional questions.
Required Minimum Distributions (RMD) must be calculated for each of your plans separately. The RMD is calculated by taking the previous end of year value and divide that by the distribution period number provided using the IRS Required Minimum Distribution worksheet. Here is the link to the table https://www.irs.gov/pub/irs-tege/uniform_rmd_wksht.pdf
After you have calculated the RMD for each account, you then have the liberty to take the RMD from one account or split it amongst the various IRA, SEP IRA, SIMPLE IRA or rollover IRA.
When calculating a RMD for multiple 401(k) accounts, you must take your withdrawal from each account. You cannot total it and withdraw all from one 401(k).
When calculating a RMD from multiple 403(b) tax sheltered annuity accounts you can total the distribution amounts and withdraw form one account or a combination of accounts.
Remember you do not have to take RMD’s from a ROTH IRA.
When you begin taking Required Minimum Distributions (RMD) at age 70 ½, you can choose which qualified account(s) you would like to take them from. To do this, you must first calculate your RMD each year, which is based upon your age and the previous year end (12/31) aggregate value of all tax deferred qualified retirement accounts. This includes:
- Traditional IRAs
- Rollover IRAs
- SEP IRAs
- SIMPLE IRAs
- 401(k) plans
- 403(b) plans
- 457(b) plans
- Profit sharing plans
- Other defined contribution plans
Once you determine the RMD, you have up until the end of the current year to withdraw the total amount from your qualified account(s). Whether you take some of it from each account or just one, the choice is yours. If you need help calculating the RMD or want to check the rules, this post on the IRS website has the most accurate information.
Quick tip, it may be easier for you to manage and may be more cost effective to consolidate all of your tax deferred accounts into a single Rollover IRA.
Stephen Rischall, CRPC
Fortunately from the IRS’s standpoint, it's pretty much your choice. The bottom line for your RMD distribution is that you must take at least the required minimum distribution from an account or accounts equal to the total required by the aggregate of all of your IRA accounts combined. Said another way, add all of the balances together, figure out what your required minimum distribution is, that amount must be taken from an account(s) of your choice.