3684 / How are minimum distribution requirements calculated if an individual owns more than one IRA?

If an individual owns more than one IRA, the required minimum distribution (RMD) must be calculated separately for each IRA, but the total for a category (Roth or non-Roth) may be taken from any one or more of the IRAs within the same category. This rule requires aggregation of amounts that an individual is required to take as the IRA owner and a separate aggregation for amounts that an individual is required to take as the designated beneficiary of a decedent’s IRA. Amounts taken as an IRA owner may not be aggregated with amounts taken as a beneficiary for purposes of meeting the minimum distribution requirements. Similarly, distributions from 403(b) contracts or annuities may not be aggregated with IRA distributions to meet the distribution requirements for either type of account.¹

Example: Mark, who is 75 years old, has two IRA accounts that he contributed to during his working years and an IRA that he inherited from his deceased father. One of his IRA balances equals $50,000 (IRA 1)
and the other equals $75,000 (IRA 2); the inherited IRA has a balance of $25,000. Mark’s required minimum distribution from these accounts is as follows:

IRA 1 = $1887

IRA 2 = $2830

Inherited IRA = $943.

Mark must take, in total, $4717 ($1887+ 2830) from his IRAs. But he could take this amount from either IRA 1 or IRA 2 (or a combination of the two). The $943 required from the inherited IRA, however, must be taken only from that account.

When an RMD is required during a calendar year, any amount distributed or withdrawn from the account will first be treated as the required distribution amount until the total required distribution has been satisfied. Consequently, such a distribution is not eligible for rollover.² However, the minimum distribution requirement may be satisfied by a distribution from another IRA owned by the same individual.³

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Planning Point: Clients with multiple accounts may be required to take more than one distribution from these accounts. In other words, not all RMDs can be aggregated and taken from any account. Failure to take the correct RMD from the correct account can expose the client to significant tax liability. When calculating RMDs, IRAs (including SEP and SIMPLE accounts) are calculated separately, but the total RMD can be taken from any IRA. Company-sponsored 401(k)s must be calculated separately for each plan and the RMD must be taken separately from each specific 401(k) account. RMDs for 403(b) plans must be calculated separately and the total RMD for all 403(b) plans can be taken from any one or more of the 403(b) plans.

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In the event of a transfer from one IRA to another, the transferor IRA must distribute any amount required under these minimum distribution rules in the year of transfer—i.e. the transfer itself will not count as a distribution that satisfies these minimum distribution rules.⁴