Determining Your Required Minimum Distribution for Multiple Plans

You must begin taking your required minimum distribution (RMD) from your retirement plans at the age of 70-1/2. This distribution is calculated based on your life expectancy; life expectancy is calculated according to an IRS formula which is published each year. If you fail to take the distribution, you will be penalized for excess accumulation at the rate of 50 percent of the failed withdrawal. It is essential to take the RMD you are required to take. For individuals with multiple accounts, an RMD is determined for each account.

Determine your RMD per Account

Regardless of how many accounts you have for your retirement, you will need to calculate a separate RMD on each account. You can calculate this amount using the Fair Market Value of your account divided by the applicable distribution period. The applicable distribution period is the portion of the calculation that depends on your life expectancy. The Fair Market Value of your account should be provided to you by your plan provider by January 31 of the given tax year. You will need to make an RMD as early as April 15 of the year following the year you turn 70-1/2. 

Determine if you are Eligible to Combine the RMD

You may be able to make one, single RMD withdrawal in order to cover your entire required amount. You may combine the RMD on any two accounts of like structure. Simply ask yourself if the two accounts are the same type of retirement account. For example, two traditional IRAs can be combined, but it is not permitted to combine a traditional IRA and a qualified plan for the purposes of a joint RMD. If you can combine the accounts, you may take a withdrawal from the account of your choice in the amount of the total RMD you must make for all accounts this quarter.

Example of Combined Withdrawal

For example, Ron has two Roth IRA accounts. He contacted the custodian of each account to determine the Fair Market Value of each. One has an FMV of $100,000, and the second has an FMV of $70,000. His applicable distribution is 23. For the first IRA, he is required to take a distribution of $4,347.83 each year. For the second account, he is required to withdraw $3,043.48 each year. This means his combined RMD is $7,391.31 each year. Since both the accounts are Roth IRAs, he can take this withdrawal from one of the two accounts.

Example of Separate Withdrawal

Sarah has two retirement accounts as well. The first account is her own traditional IRA with a Fair Market Value of $130,000. The second account is an IRA she inherited from her deceased husband with an FMV of $80,000. Her applicable distribution is 20. She must withdraw $6,500 from her IRA and $4,000 from her husband's IRA each year. Since she owns one of the accounts and the other is an inherited account, she cannot combine the RMD. She must take the RMD in the amount needed from each separate account by the due date. 

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