By Andy Ives, CFP®, AIF®
IRA Analyst
IRA owners and retirement plan participants trip over the required minimum distribution (RMD) rules all the time. Bad advice is provided, misinformation is freely disseminated on TikTok, and sometimes smart individuals do less-than-smart things. Here is a Top 10 list of common RMD mistakes:
10. Rolling over an RMD. RMDs are not eligible to be rolled over. This happens most frequently when company plan assets are rolled over to an IRA. Doing the rollover first with the idea to take the plan RMD from the IRA later will not work. If the plan RMD is not taken prior to the rollover, you have an excess contribution in the IRA that needs to be corrected.
9. Spouses combining RMDs. One spouse cannot take an RMD for another spouse, even if they file a joint tax return and report the correct overall RMD income.
8. Not considering liquidity. If your IRA investment is illiquid, that is not an excuse to miss an RMD. The IRS does not care about your cash flow issues.
7. Taking credit for withdrawing more than the RMD in the previous year. Just because you took more than your RMD last year does not eliminate your RMD this year. Taking more last year will reduce the year-end balance resulting in a lower RMD calculation this year, but an RMD still exists.
6. Misunderstanding the still-working exception. This rule can delay RMDs on a plan, but it does not apply to IRAs, nor does it apply to plans at companies at which you no longer work. It also does not apply if you own more than 5% of your company (counting family ownership).
5. Not realizing a delayed first RMD means two RMDs the following year. An IRA owner turning 73 can delay his first RMD until April 1 of the following year (i.e., the “required beginning date”). But if the first RMD is delayed, that means there will be two RMDs due the following year – the delayed RMD by April 1 and the “normal” RMD by 12/31.
4. Thinking your annual qualified charitable distribution (QCD) is limited by the RMD amount. The annual QCD limit (for 2026) is $111,000, regardless of the size of your RMD.
3. Not understanding the RMD aggregation rules. A person’s own IRAs can be aggregated for RMD purposes. IRAs and 401(k) plans cannot be aggregated.
2. Not taking an RMD at all. Missing all or part of an RMD could result in a 25% penalty if the error is not identified and corrected in a timely manner.
1. RMD calculation errors. Be sure to use the proper life expectancy table, age and balance. This is the most fundamental rule and is applicable to all accounts that have an RMD.
If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.
https://irahelp.com/top-10-rmd-mistakes/