Turn 73 in November. Two accounts, two different RMD numbers, and nobody will tell me when this actually starts

New here, been reading for a while. I turn 73 in November and I'm trying to get ahead of this required minimum distribution business before it gets ahead of me.

Here's where I'm stuck. I have a traditional IRA at my brokerage (about $410,000 at the end of last year) and a 401(k) still sitting at my old employer (about $180,000). The brokerage's website has a calculator that says my IRA RMD for this year is a little over $15,000. Then last month the 401(k) plan mails me a letter saying my required amount from THEM is about $6,800, take it by December 31, unless I want to defer my first one to April 1 of next year. Two companies, two numbers, two deadlines, and neither letter explains where the numbers come from.

A guy in my golf group says I'm overcomplicating it, the IRS only cares about the total, add the two numbers up and take it all out of whichever account is convenient. That would be simpler, my 401(k) is a pain to deal with. So three questions for anyone who's been through year one: when does this actually start for me (this year? next April?), how do they work out the amount, and is my golf buddy right?

Welcome, Richard. I've been taking mine since the starting age was 70 and a half, which tells you two things: I'm old, and the rules have moved at least twice since I started, which is why half of what you'll find online contradicts the other half. For anyone reaching the age now it's 73, so this is your year.

Two things from my own bumpy start. Year two, I simply forgot until the week between Christmas and New Year, and I spent a very unpleasant afternoon on hold finding out whether it had gone through in time. It had, barely. The next week I set up an automatic withdrawal with the provider, they calculate it and send it every November, and I have not thought about the deadline since. I'd do that in year one if I were you.

The other thing nobody warned me about: the withdrawal is taxed as regular income, and my first one made more of my Social Security taxable than the year before, which I only discovered when my tax preparer went quiet and started re-adding things. The site's piece on taxes in retirement lays out how the pieces push on each other, I wish I'd read it at 72 instead of 76.

Following this one because I'm a few years behind you with four accounts scattered around, and I've been telling people the same thing as your golf buddy. Total's the total, take it where it's cheapest to sell something. If that's wrong I'd rather find out here than from a penalty letter, so somebody correct me.

midwestbill said:

Total's the total, take it where it's cheapest to sell something.

Bill, that rule is half right, and the half that's wrong is exactly the half that bites, so let me lay out the general rules for everyone reading. This is education, not advice for any one person's accounts.

When it starts: your first RMD is for the calendar year you turn 73 (the age rises to 75 in 2033, and older articles saying 70 and a half or 72 are describing rules that no longer apply). So Richard, this year is your year even with a November birthday. The one-time wrinkle is that your first RMD can be delayed until April 1 of the following year, but the second one is still due that December 31, so deferring stacks two taxable withdrawals into one year. For many people that bunching costs more in taxes than the deferral is worth; a tax professional can run both versions of your actual return, which is precisely what they're for.

How the amount is worked out: each account's balance on December 31 of the prior year, divided by a life-expectancy factor from the IRS Uniform Lifetime Table. At 73 the factor is about 26.5, which is why Richard's numbers are each roughly 3.8% of the account: $410,000 divided by 26.5 is about $15,500, and $180,000 gives about $6,800. Same formula, two balances. The factor shrinks each year, so the required percentage creeps up as you age.

Now the aggregation rule, and here's where the golf wisdom fails. IRAs can be combined: total the RMDs across all your traditional IRAs and take the sum from any one or mix of them. Employer plans cannot: each 401(k) must calculate and pay out its own RMD separately. So Richard can't satisfy the 401(k)'s $6,800 from his IRA, and Bill, if two of your four accounts are old 401(k)s, each needs its own withdrawal. Roth IRAs have no RMDs for the owner at all, and under current rules Roth 401(k)s no longer do either. Getting this wrong isn't a rounding error: the penalty is 25% of whatever you should have taken and didn't, though it drops to 10% if you fix it promptly and file the right form. Carolyn's automatic-withdrawal setup is the cleanest insurance there is. The site's guide to required minimum distributions walks through the table, the deadlines, and the tax ripple effects (including the Medicare premium surcharge, which looks at your income from two years back) with a worked example, and IRS.gov has the current tables to confirm your own numbers.

Adding a footnote from my consolidation saga in the rollovers section: the "every employer plan does its own RMD" rule turned out to be part of MY decision too. I chose to leave my old 403(b) where it is because the fees are good, and the advisor made sure I understood the trade: at 73 it will need its own separate withdrawal, its own paperwork, its own December deadline, forever, on top of my IRA's. Still the right call for me, but if you're on the fence about consolidating, future-you at 73 gets a vote.

Reporting back, since threads that end with silence drove me nuts when I was searching. Sat down with my tax person. Deferring the first one to April would have shoved two RMDs into next year and pushed us into territory that also raises Medicare premiums down the line, so: taking it this year. IRA withdrawal is scheduled for October, and I called the 401(k) plan, who it turns out do an automatic December payout by default, which explains their letter's confidence. Told the golf group the total-is-the-total theory is half right and got shrugs all around. Thanks all, especially Carolyn, the November autopilot is getting set up next.