Robert, past 70.5, is facing a common but stressful retirement finance question: he has three separate retirement accounts and needs to take Required Minimum Distributions (RMDs) from each. He turned to Clark Howard for guidance, and the answer is simpler than many retirees expect — but it comes with important caveats.
What Clark Howard’s Community Told Robert About RMDs
On the Clark Howard Community forum, Robert asked whether he must take an RMD from each of his three IRAs individually or if he can take one RMD from one account to cover the total amount. The response from experienced community members was clear: one RMD equivalent to the total across all three accounts will work and is in accordance with IRS directives.
Why This Matters for Retirees With Multiple Accounts
For retirees like Robert, managing multiple retirement accounts can feel overwhelming. The ability to consolidate RMD withdrawals into a single transaction reduces paperwork, minimizes the risk of missing a deadline, and simplifies tax reporting. This is especially valuable for those who may not have a financial advisor or who prefer a hands-on approach.
How the IRS Rule Works for Multiple IRAs
Under IRS rules, if you have multiple traditional IRAs, you can aggregate the RMD amounts for all of them and take the total from just one IRA. However, this rule applies only to traditional IRAs, not to 401(k)s or other employer-sponsored plans. For those, each account must be handled separately unless the plan allows aggregation.
What Robert Needs to Do Now
Robert should first calculate the total RMD amount across all three accounts based on his age and account balances as of December 31 of the previous year. He then needs to withdraw that total from any one of his IRAs before the deadline — typically December 31 for most retirees, or April 1 of the following year for the first RMD. He should also confirm with each account administrator that the single withdrawal is properly reported to the IRS to avoid penalties.
Clark Howard’s Community Weighs In on Coordination Risks
One community member, H200h, cautioned that Robert should be careful about not taking the mandatory RMD from each account, especially if they have different administrators. While the IRS allows aggregation, not all financial institutions automatically coordinate. Robert should ensure that the account from which he withdraws reports the total RMD correctly, and that the other accounts are informed to avoid duplicate reporting.
What Happens If You Miss an RMD
The penalty for failing to take an RMD is steep: 25% of the amount not withdrawn, though it can be reduced to 10% if corrected promptly. For Robert, missing the deadline on any of his three accounts could result in significant financial loss. Consolidating the withdrawal into one account reduces this risk but requires careful tracking.
Confirmed Facts vs What Remains Unclear
Confirmed: IRS rules allow a single RMD withdrawal from one traditional IRA to cover the total required amount across all traditional IRAs. Unclear: Whether Robert’s specific accounts are all traditional IRAs or include other types like Roth IRAs or 401(k)s, which have different rules. Also unclear is whether his account administrators will automatically coordinate the single withdrawal without additional paperwork.
Tax Implications of Taking RMDs From One Account
Taking the entire RMD from one account does not change the total taxable income — the amount is still subject to ordinary income tax. However, it may affect which account is depleted faster, which could have long-term implications for investment growth and estate planning. Robert should consider which account has the lowest tax impact or the most favorable investment options for the withdrawal.
Risks and Balanced View
While consolidating RMDs simplifies the process, it also concentrates the tax burden into one account, potentially triggering higher taxes if that account has significant gains. Additionally, if Robert’s accounts are with different institutions, he must ensure that the IRS receives proper reporting from all accounts. Some financial advisors recommend taking RMDs proportionally from each account to maintain balance, but this is not required by law.
Wider Trend: Retirees Managing Multiple Accounts
As more Americans work multiple jobs or change employers over their careers, the number of retirees with multiple retirement accounts is growing. The IRS rule allowing aggregation of RMDs is a practical solution, but many retirees remain unaware of it. Financial literacy around RMD rules is increasingly important as the population ages.
Practical Guidance for Retirees Like Robert
If you have multiple traditional IRAs, calculate your total RMD amount using IRS life expectancy tables. Choose one account from which to withdraw the total, and confirm with all administrators that the withdrawal is properly reported. Consider consulting a tax professional or using the IRS’s RMD calculator to avoid errors. For employer-sponsored plans like 401(k)s, each account must be handled separately unless the plan allows aggregation.
Future Outlook: What Could Change
The SECURE 2.0 Act, passed in 2022, raised the RMD starting age to 73 for those born between 1951 and 1959, and to 75 for those born in 1960 or later. Future legislation could further simplify RMD rules or introduce new penalties. Retirees should stay informed about changes and review their withdrawal strategies annually.
Our Take
Robert’s question highlights a common but manageable challenge for retirees. The ability to take one RMD from one account is a valuable simplification, but it requires careful coordination and awareness of the rules. For most retirees, this approach reduces stress and administrative burden, but it’s not a one-size-fits-all solution. The key takeaway: know your accounts, calculate correctly, and verify with your financial institutions. Clark Howard’s community provided sound advice, but professional guidance is always recommended for complex situations.
Frequently Asked Questions
Can I take my RMD from one IRA if I have multiple accounts?
Yes, IRS rules allow you to aggregate the RMD amounts from all your traditional IRAs and take the total from just one account. This simplifies the process but requires proper reporting.
What happens if I miss an RMD deadline?
The penalty is 25% of the amount not withdrawn, which can be reduced to 10% if corrected promptly. Missing the deadline can result in significant financial loss.
Does the RMD rule apply to Roth IRAs?
No, Roth IRAs do not have RMDs during the original owner’s lifetime. However, inherited Roth IRAs may have RMD requirements.
Can I take RMDs from a 401(k) and an IRA together?
No, the aggregation rule applies only to traditional IRAs. For 401(k)s and other employer-sponsored plans, each account must be handled separately unless the plan allows aggregation.
