6 Important Retirement Plan RMD Rules

Not following them could result in a 50% tax penalty

The Internal Revenue Service (IRS) requires that you begin taking required minimum distributions (RMDs) from your retirement accounts after you reach a certain age. That age has been changed a few times, so it's important to know where you fall on the age spectrum:

  • You must take RMDs as of April 1 if you turned 73 on or after Jan. 1, 2023, according to the SECURE Act 2.0.
  • You must take RMDs as of April 1, if you turned 72 between Jan. 1, 2020, and Dec. 31, 2022, as per the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019.
  • You must take RMDs at 70½ if you turned that age before Dec. 31, 2019

Unfortunately, calculating these distributions is sometimes tricky. While a tax professional can certainly help you with this, it’s a good idea to get to know the rules to avoid IRS penalties. Below, we’ll take a look at six key rules that can affect RMD calculations.

Key Takeaways

  • The first distribution from your individual retirement account in any year is treated as part of your required minimum distribution for that year.
  • If you have several IRAs, you can combine the RMD amounts for each into one sum and take it from a single account.
  • Be mindful of the consequences of rolling over your distributions to another account.
  • You may still be considered married even if you divorce your spouse or they die at a certain time during the year.
  • Although your account custodian is required to tell you that an RMD is due, they don't have to calculate the amount for you unless you ask.

1. RMD Sums: Not Rollover-Eligible

Required minimum distributions must not be rolled over to an individual retirement account (IRA) or another eligible retirement plan. Similarly, they cannot be converted to a Roth IRA. If you roll over or convert your RMD, then it will be treated as an excess contribution that must be removed from the account by a certain time to avoid taxes and penalties.

Note that the limit on annual contributions to an IRA is $6,000 for the 2022 tax year and $6,500 for 2023. There's also an allowed catch‑up contribution for individuals aged 50 and over of an additional $1,000.

The first distribution from your IRA for any year when an RMD is due is considered to be part of your RMD for that year and is, therefore, not rollover-eligible.

“Be careful if you decide to roll an IRA over after the required age. Take your distribution first!” says Patrick Traverse, founder of MoneyCoach, located in the suburbs of Charleston, South Carolina.


Mary reaches age 72 in 2021. Her RMD for 2021 is calculated to be $15,000. As 2021 is the first RMD year for Mary, she may wait until April 1, 2022, to take her distribution for that year.

During 2021, Mary also received a regular distribution of $7,000 from her IRA. Even though Mary is not required to take her required RMD until April 1, 2022, the amount that she received in 2021 cannot be rolled over, as it is first attributed to her RMD for 2021.

The rule states that any amount distributed during a year when an RMD is due is considered to be part of the RMD until the full RMD amount is distributed. If Mary took a distribution of $17,000 instead, then the amount in excess of the RMD amount (i.e., $2,000) would be rollover-eligible because her RMD for the year would already be satisfied.

You could face a penalty of 25% of the value of the withdrawal if you fail to take the RMD. This amount was reduced from the previous penalty of 50% of the value after the SECURE Act 2.0 was passed in December 2022. You can reduce the fee to 10% if you correct it by the date that the penalty is imposed.

2. Aggregation of RMDs

If you participate in more than one qualified plan, such as a 401(k) and a 457(b), then your RMD for each plan must be determined separately. As such, each applicable amount must be distributed from the respective type of plan.

RMD amounts for qualified plans cannot be distributed from IRAs, and vice versa. However, if you own multiple IRAs or multiple 403(b) accounts, then you may aggregate the RMD for all similar plans (traditional IRAs or 403(b)s) and then take the amount from one account of each type of plan.


Sam, a 75-year-old retiree, has two traditional IRAs and two 403(b) accounts. Sam also has assets in a profit-sharing plan and a 401(k) plan with past employers. Let’s say the RMD amount for each of Sam’s retirement accounts is the following:

  1. IRA No. 1: $15,000
  2. IRA No. 2: $8,000
  3. 403(b) No. 1: $6,000
  4. 403(b) No. 2: $4,500
  5. Profit-sharing plan account: $10,000
  6. 401(k) account: $12,000

Here are Sam’s options for his various accounts:

  • IRA No. 1 and IRA No. 2: Sam may take either each amount from each IRA account, total the amounts, and take the money from one IRA, or take any portion of the combined amounts from each of the IRA accounts (as long as the total equals the full RMD requirement).
  • 403(b) No. 1 and 403(b) No. 2: Sam may take either the amount from each 403(b) account, total the amounts and take that from one 403(b) account, or take any portion of the combined amounts from each of the 403(b) accounts (as long as the total equals the full RMD requirement).
  • The profit-sharing plan and 401(k): The amount of $10,000 must be distributed from the profit-sharing plan account, and the amount of $12,000 must be distributed from the 401(k) account. These amounts cannot be combined.

3. IRA Transfers in an RMD Year

You may transfer your entire IRA balance even if an RMD is due, provided you take the RMD from the receiving IRA by the applicable deadline. As the custodian of your new IRA may not know that the RMD associated with the old IRA is due, be sure that you remember that it is and take it by the deadline. If you forget, then you will face a 50% penalty.

RMDs were eliminated for the rest of 2020 as a result of the March 2020 passage of the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, meant to help Americans hit hard financially by the impact of COVID-19.

4. Death, Divorce, and the RMD

If you were married as of January 1 of the year when the calculation is being done, then you are treated as married for the entire year for RMD calculation purposes. This applies even if you divorce or your spouse dies later in that year.

That means if your spouse beneficiary is more than 10 years younger than you are, then you may still use Table II in Appendix B of IRS Publication 590-B, titled “Joint Life and Last Survivor Expectancy.”

“Upon divorce, RMDs and retirement assets, in general, can become very tricky and can vary from state to state,” says Dan Stewart, CFA, president of Revere Asset Management Inc. in Dallas. “And community property states would have different rules than other states. So competent counsel is important, especially to avoid or minimize taxes.”

5. Family Attribution Rule

An individual who owns more than 5% of a business is not allowed to delay beginning the RMD for a non-IRA retirement plan beyond April 1 of the year following the year when they reach age the required age, even if they are still employed.

If you own more than 5% of a business and your spouse or children are employed by the same business, then your ownership may be attributed to them. This means that they, too, might be considered owners and could be subject to the same deadline as you.

6. IRA Custodian Reporting

Each year, the custodians/trustees of your traditional IRA, SEP IRA, or SIMPLE IRA must send you an RMD notification if they held that account on December 31 of the preceding year. This notification must be sent to you by January 31 of the year when the RMD applies.

Some custodians will include a calculation of your RMD amount for the year, while others will inform you that an RMD is due and only offer to compute the amount upon your request.

The Bottom Line

The six rules discussed here are meant to serve as a general guide for all retirees. As such, they should not be taken as exhaustive. In fact, there may be certain conditions that apply to you specifically given your circumstances and situation. If you have any questions about how to calculate or when to take your RMDs, then it is worth consulting with a tax professional.

Article Sources
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