Why Should I Aggregate My Required Minimum Distributions? (Aggregation Rules)

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Note: The content provided in this article is for informational purposes only and should not be considered as financial or legal advice. Consult with a professional advisor or accountant for personalized guidance.

Should I Aggregate My RMDs? People frequently have multiple IRAs and retirement accounts, and wonder if they can take their RMDs from one account instead of from all of the accounts.

The Required Minimum Distribution (RMD) is the minimum amount that a retirement account owner must withdraw from their account each year. The RMD is calculated based on the account owner’s life expectancy and the value of their account. The RMD aggregation rules state that if an account owner has more than one retirement account, they must calculate the RMD for each account separately.

However, the account owner can withdraw the total amount of their RMD from any one or combination of their retirement accounts.

There are several reasons why someone might have more than one retirement account. For example, they may have multiple employer-sponsored retirement plans, or they may have both a traditional IRA and a Roth IRA.

Regardless of the reason, the rules for aggregation of RMDs apply to all retirement accounts. The RMD aggregation rules can have a significant impact on retirement planning.

If you don’t withdraw your RMDs by the deadlines, you will be charged a 50% penalty.  So it is critical that you understand the minimum distribution rules.

For more – read my recent article about the Is There a Penalty For Missing The RMD Deadline.

You must begin taking withdrawals from your IRA, SEP IRA, SIMPLE IRA, or qualified retirement plan account when you are 72 years old, or 70 1/2 years old if you reach 70 1/2 years old before January 1, 2020. The minimum taxable distributions are determined by your age and the account balance as of the prior Dec 31. 

The RMDs for the IRAs are calculated using the total value of all traditional IRA accounts. It is up to the you to decide how much, if any, you want to withdraw from each of your IRA accounts. As a result, you have the option to cover your minimum distribution obligations from a single account or all of your IRAs.

A Roth IRA does not have an RMD.

How Are RMDs Calculated

As you approach retirement, you will hopefully have developed a plan for how you intend to withdraw funds from your qualified plans.  Eventually you will be required to withdraw funds, even if you don’t want or need them.  These are called RMDs, or required minimum distributions.

Required minimum distributions, or RMDs from a qualified retirement plan are ongoing withdrawals from the account.  The treatment of withdrawals count as ordinary taxable income to you.

You can typically begin withdrawing at age 59 ½ and no later than when their RBD, when they turn age 72 for RMDs.  An RMD is the minimum amount that you must withdraw from your IRA each year.

You can have multiple IRA accounts, either with the same or different financial institutions. The good news is that you can withdraw the total amount of your RMD from just one of the accounts. So, if you have an RMD of $10,000 and you have two IRA accounts, you can withdraw the entire $10,000 from just one of the accounts.  Or you can withdraw funds from each account.

You will need to calculate your RMDs separately for each account. The RMD is based on the account balance, so if you have two accounts with different balances, you’ll have two different RMDs.

How do you calculate required minimum distributions RMDs?

I will summarize how to calculate RMDS here:

There are a few different ways to calculate your required minimum distribution (RMD), but the most common method is to use the Uniform Lifetime Table. This table factors in your life expectancy and provides you with a percentage of your account balance that you must withdraw each year. You must begin taking RMDs by April 1 of the year following the year you turn age 72.

it is often overlooked as a question. And I have rarely seen financial advisors advise this. A husband and wife CANNOT combine or aggregate their RMDs together. They must take separate RMDs from each other the reason, because they are INDIVIDUAL Retirement Accounts.

Complete Guide To The SECURE Act & RMDs – Everything You Want to Know

2022 SECURE Act & RMDs Required Minimum Distributions – Everything You Want to Know

The Secure Act was passed in December of 2019 and made some significant changes to the rules around retirement accounts, most notably around required minimum distributions (RMDs). Starting in 2020, the age for RMDs was increased from 70.5 to 72. This gives account holders an extra 1.5 years to let their account grow without having … Continue reading

RMD Multiple Accounts

Can I Aggregate my RMDs From an IRA and 401 k Plan?
You can combine RMDs from IRAs but no, you cannot combine RMDs from 401k accounts or other active employer plan. People who are still employed and participants in retirement plans may not have to withdraw an RMD from that account.

Can I Aggregate My RMDS Required Minimum Distributions From IRAs and 401k?

Yes, you can aggregate your RMDs from IRAs.  You can combine your RMD amounts into one distribution if you choose.  The total amount of the RMDs cannot be less than the required minimum amount for the multiple IRAs though.

This can be done by taking the total distribution amount by adding up the number of required minimum distributions from multiple accounts.

For 401ks, you cannot combine RMDs though you must withdraw RMDs separately from each 401k that is subject to RMDs

For a 403b though, you can combine RMDs. 403b RMDs can be aggregated.

For example

If you have three RMDs from three separate IRAs

• $10,000
• $  8,000
• $  2,500

You can choose to take those amounts from each of the multiple accounts

OR

You can take the total distribution amount of $20,50 in one aggregate distribution amount, from one account

Here is some information on aggregate RMDs from the National Association of Plan Advisors

• Keep in mind that non deductible IRA contributions will be taxed differently, and I suggest you speak with a tax advisor. For informational purposes – you have issues such as pro-rata basis, aggregated basis, etc to deal with.

What Are Aggregate Required Minimum Distributions RMDs?

Aggregate required minimum distributions RMDs are the total amount of separate distributions that must be taken from all of an individual’s retirement accounts IRAs during a single tax year. The aggregate RMD amount is calculated by adding together the RMDs for each individual retirement account.

If you have more than one employer retirement account then you must calculate the RMD amount for each retirement account and then add the RMD amounts together to arrive at the aggregate RMD taxable withdrawal.

If you do not take the RMDs  from a retirement account, the IRS may assess a 50% penalty on the amount of the RMD amount that was not taken. This penalty is in addition to any taxes that may be owed on the account.

How Are My Aggregate RMDs Calculated?

To calculate the RMD amount, the IRA owner will need to know the value of their account at the end of the year and their life expectancy. The life expectancy can be found in the IRS life expectancy table in IRS publication 590-b. The account balance can be found on the account statement.

See more in my recent article about the new IRS Life Expectancy Tables for 2022 and RMDs.

Once you have these two pieces of information, you can then use a calculator or online tool to determine the RMD. Most financial institutions that offer retirement accounts will have an RMD calculator on their website.

For more on RMD calculators, read my recent article.

Once the RMD is calculated, the original account owner can take the distribution from their account.  When you take an RMD, it will be taxable as ordinary income. You can choose to withhold for income taxes at the time of the RMD distribution.

For more on that, read my recent article about RMDs Taxable income

What Are The Benefits of Taking Aggregate Required Minimum Distributions RMDs?

There are several benefits of combining, or to taking aggregate RMDs from an IRA. 

• One is that it can be easier for you.  Taking RMDs from each IRA can be a hassle, especially if you have different types of accounts with different investment firms. 
• It can help simplify the distribution process, making it easier for the recipient to track and manage. T
• Finally, combining RMDs can help ensure that the separate distributions are received in a timely manner, which can be important for meeting the Dec 31 deadline.  Or proving it, if the IRS ever audits you..

What Are the Cons of Taking Aggregate RMDS from Your IRA?

There are a few drawbacks to taking aggregate RMDs.

• It can create an administrative burden.  As the account holder will need to keep track of two separate account balances and additional distributions.

CONCLUSION – How Many Retirement Accounts Can I Have?

• You can have as many individual retirement accounts, or IRAs, as you choose.
• The amount you can contribute in a single year is, however, restricted.
• Asset allocation, fees, withdrawals, taxes, paperwork, account questions, and asset transfers to beneficiaries are all easier to manage when retirement accounts are consolidated.
• Note that inherited IRAs are not included in that aggregation rule. 

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If you have made it this far – you probably appreciated the above article. As a thank you, please help me by:

• Sharing the article with your friends on social media – and like and follow us there as well.
• Sign up for the FREE personal finance newsletter, and never miss anything again.
• Take a look around the site for other articles that you may enjoy.

Note: The content provided in this article is for informational purposes only and should not be considered as financial or legal advice. Consult with a professional advisor or accountant for personalized guidance.