Manzanillo Sun article

How to Work With Multiple Retirement Plan Balances

Finances Yann Kostic

By Yann Kostic and Tom Zachystal from the January 2019 Edition

Are you getting close to retirement or have you already retired? If so, it is likely you have more than one retirement plan.

You’re not alone. Many investors have multiple retirement plans; unfortunately they believe that having several plans makes it difficult to calculate required minimum distributions (RMDs). That need not be the case.

Say that in addition to several Individual Retirement Accounts (IRAs) you have a 401(k) plan and a 403(b) plan, all of which are still with the firms that initially handled the investments for your employers.

In this situation, you would be required to take three RMDs at age 70½: one RMD from each of your three separate pools of money. The first pool would be your 401(k) money; the second, your 403(b) money and the third your IRA money.

If you have multiple IRAs, once you have determined your total IRA RMD, you can choose to withdraw the total IRA, RMD from one or any combination of your IRAs. Similarly, if you have multiple 403(b) accounts, once you have determined your total 403(b) RMD, you can choose to withdraw the total 403(b) RMD from one or any combination of your 403(b) accounts.

While it is OK to have multiple accounts, the reason for consolidating is not the RMD. It is generally a good idea to roll over your 401(k) and/or 403(b) into a Rollover IRA, since you almost always have much better investment choices and flexibility with an IRA. Another good idea is to consolidate all your IRAs into one, even if you have multiple beneficiaries living in multiple countries: it is somewhat easier to manage and reduces paperwork (or internet accounts).

These points may need clarification, and tax laws are always changing. Consult your advisor before taking RMDs from your retirement account. Remember first that, whatever you do, do it well before December 31st, and second, that no one is ever too careful with RMDs as that the cost of procrastination is prohibitive: the IRS penalty for not taking your RMD out before the deadline is a very stiff at 50%.

This article is not intended to provide tax or legal advice and should not be relied upon as such. Any specific tax or legal questions concerning the matters described in this article should be discussed with your tax or legal advisor.

Note: This material has been prepared for informational purposes only, and is not intended to provide financial advice for your particular situation.

Yann Kostic, MBA and Tom Zachystal, CFP, are Presidents of their respective Assets Management firms, both US-Registered Investment Advisors (RIA). Tom is the San Francisco Financial Planners’ Association President. Tom and Yann cater to US expats in Mexico and worldwide. Comments, questions or to request his newsletter, “News you can use” contact him at, in the US at (321) 574-1 529 or in Mexico, (376) 106-1613.

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