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Take Your RMDs From Your Smallest IRA

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Here’s a strategy that you could use to simplify your life: when you’re subject to Required Minimum Distributions (RMDs) after age 70½, you have the option of taking separate RMDs from each IRA that you own OR you could take all of your RMDs from one account if you like.

As long as you calculate your RMD based upon all of the IRAs that you own, you are free to take the full amount of all of your RMDs from one single account (or several accounts) if you wish.  And keep in mind that the “I” in IRA stands for Individual – so you can’t aggregate your IRAs with your husband’s, for example.

By doing so, you could eliminate the smaller account(s) if you wish, thereby reducing paperwork (fewer accounts and statements).  As well, you don’t have to keep track of as many accounts for estate planning. But then again, you might have chosen to have multiple accounts in order to leave certain amounts to separate groups at your passing.  If that’s the case, you can choose to take your RMDs from each individual account, reducing each account by a small amount each year.

Keep in mind that this only applies to IRAs.  If you have 401(k) plans or other non-IRA retirement accounts that also have RMD requirements, those amounts must be specifically taken from those accounts.  This can be another reason why rollover from the qualified retirement plan into an IRA can be beneficial.  You can also eliminate the smaller IRAs by rollover as well.

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  1. Steve says:

    If you want to reduce paperwork, why not just consolidate all your IRAs at one place? (Or if you’re trying to stay in SIPC limits, fewer places). Roth and non-Roth IRA accounts have to be separate, of course, but Roth’s aren’t subject to RMD’s anyways.

  2. Jim these are great points. Most important point is that these choices should be discussed with a tax/estates attorney and/or tax accountant/CPA before doing anything.

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