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4 Top RMD (Required Minimum Distribution) Questions

November 4, 2019

4 Top RMD (Required Minimum Distribution) Questions

Do you have questions about your RMD’s? Schedule your free 15-min. RMD call today >>>


It’s the most wonderful time of the year. Do you know what that means? Not Christmas…It’s our RMD (Required Minimum Distribution) season!

If you are 70½ or older and you have IRA accounts, you must take money out of your account before the end of the year. Inevitably, we receive lots and lots of client questions that come in during this time of year when we’re processing these RMDs, trying to send you  money out of your accounts so that you don’t get penalized by uncle Sam. 

In today’s video you’ll learn:

  • The difference between net and gross distributions
  • When you need to take your RMDs… and the few exceptions when you don’t
  • Whether or not you need to have taxes withheld from your distributions
  • How to take your distributions when you have multiple IRA accounts

Click here to watch the full video or read the full video transcript, below.

4 Top RMD (Required Minimum Distribution)


We polled Melissa and Casey, who are the two in our office who field most of the calls regarding the required minimum distributions, otherwise known as RMDs. We asked them what are the top questions that you get asked by clients when you’re processing these RMDs.

If you’re taking a required minimum distribution or if you are planning to start doing that in the next couple of years, I want you to pay close attention to today’s video because I’m going to break down the 4 top questions that we get asked from clients during this time of year!


What is the difference between net and gross distribution?

Let’s say that your required minimum distribution from your IRA account this year is $10,000. That’s the gross amount that you must take out of the account for the year. But if you want taxes withheld, we can do that for you. If you want to withhold 20%, we would send $2,000 to uncle Sam and then you would get a check for $8,000.

That is the difference between gross and net. The gross distribution is what you must take out, which is the $10,000 and the $8,000 is the net distribution that hits your bank account after we send money to uncle Sam to cover those taxes.


Do I have to take my RMDs?

With very few exceptions, the answer is yes! There’s a hint in this answer because required minimum distribution is required in all but a few special circumstances. You are required once you hit age 70½ or if you have inherited IRAs.

There are a variety of circumstances where there are some exceptions. If you’re in your 401k plan and you’re still working, you don’t have to take RMDs out of your 401k account. However, you would have to take them out of your IRA.

Each circumstance is different, but the general answer is yes. if you are 70 ½ or older, you must take money out of your account this year. If it’s a Roth IRA, you don’t have to touch it. But a for a traditional IRA, you will have to take that money out.

Bonus Tip: If you’ve watched the other RMD videos that I’ve done, there are a few ways you can lower your tax bill if you don’t need to take the money out. One of which would be donating that money directly to charity. That’s called a qualified charitable distribution. Great option for those of you who would like to do good and save some money on taxes at the same time.


Do I need to withhold taxes?

You don’t have to have any withholding for taxes on your required minimum distribution. If you take $10,000 out, that’s your RMD or required minimum distribution. You can take that full $10,000 but you would likely have to pay based on your tax situation.

This is where the water gets a little bit muddy. You’re probably going to owe taxes on that distribution that you took because it’s included as part of your income. For most people, unless you’re in a really, really low tax bracket, it makes a lot of sense to put some withholding on that so you don’t have a big tax surprise come April.

You don’t have to withhold money for taxes though. I think the bottom line here is that it’s really important that you talk with your tax advisor to get some guidance on whether or not you should withhold in the first place for taxes. More importantly, what amount is right for you. Here in Oregon we have income taxes as well. You may want to withhold some for state and federal taxes or just federal or nothing at all.

Bottom line, if you’re like most people, you don’t want to withhold too much because you’re just giving the government money for free to hang on to. They’re not going to pay you back with any interest on that. However, you don’t want to withhold too little either because you could have a tax surprise later. Finding that right balance is key and the only way you’re going to do that is by talking to someone who knows your tax situation intimately.


Can I take my RMD from just one account or do I have to take my RMD from all accounts?

This is a common issue that we deal with because many of our clients have multiple IRA accounts. Let’s say you have three IRA accounts and your spouse has two other IRA accounts. You’re both taking required minimum distributions, and therefore, you have five different required minimum distributions to take. This one gets a little bit more nuanced. If you have a 401k account and let’s say you have three old 401ks and you haven’t consolidated those into an IRA, you do have to take those RMDs from each of those four old 401k accounts.

However, in an IRA, you can lump the required minimum distribution for yourself. Your spouse must take care of theirs separately. You can’t lump you and your spouse’s together. For instance, if you have three IRA accounts, you can calculate what the RMD is and sum them up for the total of all three. You can then take them out in whatever proportion you want to from whichever account you want to.

Do You Have Questions About Your RMDs?

We have to make sure that you take your full RMD amount out, because if you don’t, you’re penalized. And the penalties are pretty stiff on the amount that doesn’t get taken out for the year. We put a lot of time and effort into tracking this and making sure that our clients take their required minimum distribution by the end of the year.

Do you have questions about your RMD’s? Schedule your free 15-min. RMD call today >>>


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Ashley Micciche of True North Retirement Advisors


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