She Turned 73 With Two Old 401(k)s and an IRA. One Withdrawal Covered All Three, and the IRS Penalized Two of Them.

She Turned 73 With Two Old 401(k)s and an IRA. One Withdrawal Covered All Three, and the IRS Penalized Two of Them.

David Beren

Mon, August 31, 2026 at 11:34 PM GMT+3 5 min read

Quick Read

• IRA withdrawals cannot satisfy 401(k) RMDs. Each 401(k) requires its own separate distribution, no matter how much you pull from the IRA.

• Missing a 401(k) RMD triggers a 25% excise tax, but filing Form 5329 within two years cuts that penalty to 10%.

• Rolling old 401(k)s into a single traditional IRA via direct trustee-to-trustee transfer reduces multiple RMD calculations to one annual withdrawal.

• Read More: Learn 7 ways to generate income with a $1,000,000+ portfolio (sponsor)

At age 73, retirement savers face a firm deadline set by the IRS. That is when Required Minimum Distributions begin under the SECURE 2.0 Act, and the IRS begins expecting a slice of the pre-tax money that has been growing untouched for decades. The mechanics look simple on paper: calculate the amount, take the withdrawal, and report it on the tax return. Real accounts complicate that picture, and one woman's story shows why.

Heading into the year, she had three accounts to track: two old 401(k)s from previous employers and a traditional IRA she opened after leaving her last job. She crunched the numbers correctly and arrived at the right total RMD figure across all three. Then she took the full amount as a single distribution from the IRA, filed her return, and figured she was in the clear. But two of those three accounts still owed the IRS their own separate distributions. She had satisfied the IRA's requirement, but the 401(k)s were left untouched.

Aggregation Rule That Traps Retirees

The rule that trips up most retirees is surprisingly narrow. With traditional IRAs, you can aggregate your RMDs. That means you can calculate the total amount you need to withdraw across all your IRAs and then take that full sum from just one of them. But 401(k) plans don't work that way. Each 401(k) has to generate its own separate RMD, calculated based on that plan's balance and taken directly from that plan's assets. No matter how much you pull from an IRA, it only counts toward the IRA's RMD, period.

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That distinction is exactly where the penalty came from in this case. The withdrawal from the IRA satisfied the IRA's required distribution. But the two 401(k)s were never touched, and each one generated its own excise tax for that year.

What the Penalty Actually Costs

Under SECURE 2.0, the missed-RMD excise tax was reduced from 50% to 25% of the shortfall. If the account holder corrects the error within the two-year correction window and files Form 5329, the rate can drop to 10%. That still leaves ordinary income tax owed on top of the excise tax when the shortfall is finally distributed.

For a retiree drawing down accounts that took a lifetime to build, the effect compounds. The BLS Consumer Expenditure Survey put average annual expenditures at $78,535 in 2024, up from $77,280 in 2023. A four-figure penalty registers meaningfully against that baseline.

Why Consolidation Changes the Math

The simplest way to avoid that aggregation trap is to shrink the number of accounts that generate separate RMD calculations. If you roll old 401(k) balances directly into a single traditional IRA, you collapse three separate RMDs into one, calculated on a single balance and satisfied by a single distribution. And when you handle the rollover as a trustee‑to‑trustee transfer, it does not count toward that year's RMD, as long as you take the RMD from the 401(k) before moving the money over.

Consumer advisors have been hammering on this point for years. On the Clark Howard show, one caller asked whether she should keep her 401(k) where it was or start thinking about moving everything into an IRA for the future. Advice for retirees managing multiple plans usually leans toward consolidation, if only to keep the RMD math from turning into a headache.

Broader Context for Retirement Withdrawals

The 2027 Social Security cost-of-living adjustment is currently tracking toward 3.1%, meaning benefit checks will rise modestly while account withdrawals remain the larger variable in most retirement budgets. Recent coverage has focused on the same pattern. AARP has warned Americans about costly 401(k) and IRA mistakes, and outlets including AOL and SmartAsset have run pieces this summer on RMD errors and inherited-account traps. The aggregation quirk is one of several IRS rules that quietly drain retirement accounts, and we charted the rest in a free tax trap map for retirees.

SECURE 2.0 also reshaped what workers do before they reach RMD age. Starting in 2026, employees 50 and older who earned more than $150,000 in the prior year must direct catch-up contributions into a Roth 401(k) rather than a pre-tax account. That change lowers future RMD balances for high earners, since Roth 401(k) money is no longer subject to lifetime distribution requirements.

Three Actions That Prevent the Penalty

1. Take each 401(k) RMD from its own plan. Aggregation applies to IRAs and, separately, to 403(b) plans, but each 401(k) requires its own distribution calculated on its own balance.

2. Consolidate old 401(k)s into a single traditional IRA through a direct rollover after the year's RMD is satisfied. Fewer accounts mean fewer separate calculations next year and a single aggregated RMD going forward.

3. If an RMD is missed, file Form 5329 with a reasonable-cause statement promptly. Correcting within the two-year window can drop the excise tax from 25% to 10%.

For anyone approaching 73 with more than one workplace plan still open, the aggregation rule applies separately to each 401(k), and only the account structure is within the retiree's control.

A $1,000,000 Income Portfolio

If you've saved over $1,000,000, this guide is for you. The last thing you want in retirement is to run out of money, you want your money to generate lasting income while you enjoy your life.

Now you can learn the strategies wealthy retirees use to fund their retirement with The Definitive Guide to Retirement Income from Fisher Investments. Download the guide today! (sponsor)

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