Consolidating multiple 401k accounts
In fact, if Brian had inherirted an IRA from his dad and also from his mom, you may not combine distributions for those inherited IRAs (similar to the rule for mutiple qualified accounts) If you err in combining RMD amounts for different types of retirement plans, an RMD deficiency will result for the retirement plan from which you withdrew no RMD.For instance, say the RMD for your qualified plan is ,000 and the RMD for your Traditional IRA is ,000.“I think it will become a burden when it comes time to retire,” says Craig Copeland, an analyst at EBRI.For instance, at 70.5 years (or older if you work beyond that age), 401(k) and IRA holders must make required minimum distributions.RMD amounts for qualified plans cannot be distributed from IRAs and vice versa.However, if you own multiple IRAs or multiple 403(b) amounts, you may aggregate the RMD for all similar plans (Traditional IRAs or 403(b)) and then take the amount from one account of each type of plan.There’s yet another wrinkle in the new age of retirementand job insecurity— keeping track of all those company retirement savings plans you’ve racked up, along with that IRA you opened years ago, and creating a coherent investment strategywith them. “Our current system of self-directed retirement accounts really requires people to do what they’re not equipped to do,” says Teresa Ghilarducci, director of the Schwartz Center for Economic Policy Analysis at the New School in New York.
In most cases, experts say, people should consolidate their accounts; to do otherwise flies in the face of fundamental investing principles.Brian, age 72, has two contributory IRAs and two 403(b) accounts.Brian also has assets in a ex-employer qualified plan and a 401k plan with a past employer.A more recent study by AON-Hewitt showed that of all workers who terminated their employment in 2011, 40 percent took a cash distribution, 30 percent left their assets in the plan and 30 percent moved their balances over to another qualified plan.What is clear is that there is an enormous amount of money at stake.
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Brian cannot combine the two RMD amounts and withdraw from only one.