Understanding RMDs
By Ben Maas, CIS, CIP, CISP
We have an IRA owner who would like to aggregate his RMDs from his 401(k) plan and his Traditional IRA and remove the aggregate amount from his Traditional IRA. Is this allowed?
No. Although RMDs from separate IRAs can be aggregated and taken from one Traditional IRA, individuals cannot satisfy RMDs from qualified retirement plans by taking a Traditional IRA distribution. In addition, individuals cannot satisfy Traditional IRA RMDs by taking distributions from their qualified retirement plans.
A Traditional IRA owner, age 77, came into the financial organization and took a distribution in December. He took his RMD in July. He said he plans to roll over the distribution in early February. If he rolls over the distribution as planned, how do we calculate the 2025 RMD?
You need to add the rollover amount to the December 31, 2024, balance and calculate the RMD using the resulting figure.
We have an individual who opened a Traditional IRA in her RMD year by making a prior-year contribution before the deadline. As such, her new IRA does not have a December 31 prior-year balance. Is she required to take an RMD if she does not have a prior-year-end balance to calculate the RMD amount?
No. The RMD rules do not require financial organizations to add to the December 31 balance any regular contributions made after December 31 (i.e., prior-year contributions). When there is no December 31 balance to calculate an RMD, an RMD is not due.
Must IRA owners take RMDs if they are still working?
Yes. While qualified retirement plan participants who are not more than five percent owners may delay taking their first RMD until the later of 1) April 1 following the year they attain age 73, or 2) April 1 of the year following retirement (if the plan document allows), IRA owners who have reached their required beginning date (April 1 following the year they turn 73) must take their RMD each year, even if they are still working.
If a Traditional IRA owner distributes more than the RMD amount, can the excess amount that was distributed be used to reduce the RMD for next year?
No. A Traditional IRA owner cannot carry over amounts that exceed the RMD and use them to satisfy a subsequent year’s RMD.
