Multiple Retirement Accounts Usher in Pay-Out Complexity and Opportunities

Over the years, as a consequence of changing jobs and career direction, you have accumulated multiple retirement accounts which has led to pay-out complexity and opportunities. When it comes to retirement, all accounts are not created equal and chances are you will need some expert advice on how to strategically make these savings work for you and not against you. That is because there are separate rules that apply to Individual Retirement Accounts (IRAs), defined contribution 401(k) plans, and subsets of rules within those categories as well.

Pay-Out ComplexityMultiple Retirement Accounts

You can expect to meet a required minimum distribution (RMD) when you reach retirement age of 70 1/2, as required by the Internal Revenue Service. In order to calculate your personal RMD, you can get some assistance with a calculator designed to calculate these withdrawals on retirement account provider’s website. Roth IRAs do not require withdrawals until after the death of the owner.

However, the RMD for the different types of retirement accounts vary. For instance, if you have had exposure to several IRAs, you might be able to streamline the RMD from a single plan. However, you must still calculate the payout amount on an individual-plan basis.

Meanwhile, 401(k) distributions could require that you take distributions from each individual plan.  If you are thinking of consolidating your retirement plans and rolling your 401(k) assets over to your IRA, take the RMD from your 401(k) first. This is because the 401(k) RMD does not qualify for rollover status.

Keep in mind that if you miss the initial RMD requirement, you are vulnerable to a hefty tax of up to half the amount of the distribution you should have taken.

RMDs might seem like a burden if you are not quite ready to begin taking distributions, but there are some ways to delay the payouts. This is where the opportunities come in.


If you are not quite ready to receive the distributions from your IRA or 401(k) plan, there are some options. For instance, while you may not be able to bypass the RMD, you can make qualified charitable distribution or QCD to an organization eligible to receive tax-deductible contribution that you would like to support. The maximum annual exclusion for QCD is $100,000 and any QCD in excess of $100,000 exclusion limit is included in income as any other distribution. However, you need to make sure that the QCD/RMD is sent directly to a qualified charity of your choice by the IRA custodian. The donation counts as your RMD but doesn’t increase your adjusted gross income (AGI), which can be particularly helpful if you don’t itemize and can’t deduct charitable contributions. Also, not increasing your AGI could help you avoid Medicare high-income surcharge or help make less of your Social Security benefits taxable.

Another opportunity surfaces if you are still employed by the employer who sponsors your 401(k) plan and you do not own more than 5% of the company. In this case, you may be able to postpone your RMD until the year after you reach retirement age of 70 1/2. Similarly, you can postpone your initial IRA distribution but keep in mind the next year you must take a double pay-out to compensate for the missed distribution. As a result, your income will rise, which could mean you are subject to a higher income tax rate.

Also, consider buying a qualifying longevity annuity contract or QLAC inside your IRA. You can use up to 25% of your IRA (but not more than $125,000) to purchase an annuity from an insurance company the QLAC helps reduce your RMD, it is taken out of your “base “for computing RMDs on the rest of the IRA.


Having multiple retirement accounts can be complicated, but retiring does not have to be. Contact us at Klein Hall CPAs for advice and direction on your multiple retirement accounts today.