It’s a long way off, but I’d still like to know. At age 70 1/2 the IRS says you have to take a RMD (Required Minimum Distribution) which is calculated from your account. OK, my question is which IRA account or all IRA accounts?
Allow me to explain, over time people have more than one IRA account. They might even be at different banks. When you have to take a RMD, do you have to sum up the balances on all your IRAs and take an equal amount from each, or just from one?
The other question about this, is if you have IRAs and ROTH IRAs, you might want to take your RMD at times from just the ROTH IRA to avoid paying taxes on the distribution.
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I’m not a tax expert, but as I understand it you have to take a proportional amount, not an equal amount, from each account. I’ve read somewhere that it is easier to consolidate all accounts subject to the RMD into a single account to make it easier to do this and avoid the huge penalty for doing it wrong.
Also, Roth account withdrawals won’t help you. The entire point of the RMD is to get you to pay taxes.
Might be a good idea to get expert advice as you get close to retirement.
From conventional IRA accounts as long as you use the combined value of all accounts to calculate the RMD you can take the distribution from any or all of them, so you can use the distribution as a tool to rebalance your accounts.
You can not take a distribution from a Roth IRA to satisfy your RMD. A Roth IRA has no RMD, at least while you’re alive, and is not included in the total of your IRA accounts to determine the RMD. Your non spousal heirs will have to take RMD’s after your death, but they can be spread out over the life expectancy of the heir.
Many accounts have an option where they will calculate the minimum distribution and send you a check every December. However, they will calculate the amount based only on that account, so if you want to go that route, you need to elect that option for each of your accounts. However, it is a fairly easy computation to make and most people want to take it all from their worst performing account (this is what I do).
I’m not in the distribution phase yet, but my plan is to use the RMD to adjust my allocation back to my target, so if one specific account were up I’d pull from there. That helps you avoid selling into a bear market.