Taking a Required Minimum Distributions From an IRA or 401(k)

This is one of those subjects that can be a bit confusing – and it’s based on the rules that apply to the different kinds of plans.  You are aware that you’re required* to begin taking Required Minimum Distributions (RMDs) once you reach age 70½ – but did you know that specifically which account you take the RMD from has some flexibility?  Well – not just flexibility, also some rigidity…

There is a Difference Between an IRA and 401(k)

Starting off, we need to understand that, in the IRS’s eyes, there is a big difference between an IRA and a 401(k).  For brevity, we’re referring to all sorts of Qualified Retirement Plans, such as 403(b) or 457 plans, as 401(k) plans. You may consider the two things to be more or less equal, but if you think about it, there are considerable differences between the two – amounts you can fund the account with each year, catch-up arrangements, who can defer funds into each kind of plan, and the list goes on.

A 401(k) plan, being an employer-provided retirement plan, has a completely different set of rules governing it – including provisions that go all the way back to the original ERISA legislation.  Among those rules are the rules about RMDs.

On the other hand, the IRA is not covered by ERISA, and as such there are other rules that apply to these arrangements – including the RMDs.

We don’t have nearly enough space here to go over everything that is different between these two types of plans, but we’ll cover the RMD treatment fairly well.

Required Minimum Distributions (RMD)

Each and every 401(k) plan that you own is treated as a separate account in the eyes of the IRS.  As such, if you have four old 401(k) plans when you reach age 70½, you will have to calculate and take a separate RMD from each 401(k) plan that you have.  In other words, you couldn’t aggregate all the plans together and take one RMD from one of the accounts that is large enough to cover all the RMDs.  In addition, you have to consider each account separately and figure out how much of each RMD is taxable, if you have post-tax dollars in the account(s).

However, no matter how many IRAs that you have, since the IRS looks at these plans as one single plan, you are allowed to pool all of the account balances together, calculate the RMD amount, and then withdraw that amount any single IRA account or any combination of accounts.  Your tax basis is aggregated as well, so the tax treatment is a consideration for the entire pool of your IRAs in total (rather than account by account as is the case with 401(k) plans).


You have two old 401(k) plans and three IRAs.  This is your year, you’ve reached age 70½, so you have to start taking RMDs.  How do you do it for these five accounts?

Each 401(k) plan has to be calculated separately – and a RMD taken directly from each account.  But you can pool the IRA account balances together and take one RMD from one of the accounts that is large enough to cover all three accounts’ minimum distribution.

This is another reason why it can be helpful (from a paperwork standpoint, if nothing else) to rollover your old 401(k) plans into IRAs.  By doing this, you don’t have to take a distribution from, in the case of the example above, three different accounts at a minimum.

* One final note: if you are still working at and after age 70½ and your 401(k) plan allows it, you may not be required to take RMDs from the account.  This is yet another difference between IRAs and 401(k)s with regard to distributions.

IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (or in any attachment) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this communication (or in any attachment).

About the author

Jim Blankenship, CFP®, EA

Jim Blankenship is the founder and principal of Blankenship Financial Planning, Ltd., a financial planning firm providing hourly, as-needed financial planning and advice. A financial services professional for over 25 years, Jim is a CFP professional and has earned the Enrolled Agent designation, a designation that qualifies him as enrolled to practice before the IRS. Jim is also a NAPFA-registered financial advisor, which designates him as a Fee-Only Financial Advisor.

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  • Phyllis –

    RMD amounts depend on two things: your age during the tax year, and the balance in the account at the end of the previous tax year. You then look up your age in the appropriate table (more on this on the IRS website, Publication 590) and apply the factor for your age to the balance of your account at the end of the prior tax year. When you divide the account balance by your factor, the number that you come up with will be the amount of your Required Minimum Distribution (RMD) for the year.

    Hope this helps –


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