How Does RMD Work for Married Couples?

A Required Minimum Distribution (RMD) is the amount that federal law requires you to withdraw from most retirement accounts annually. The age to begin these withdrawals depends on your birth year. For those born between 1951 and 1959, RMDs begin at age 73, while for individuals born in 1960 or later, the starting age is 75.

The government provides tax advantages for retirement savings, and RMD rules ensure that the deferred taxes on these savings are eventually paid. For married couples, the regulations center on individual responsibility. Each spouse has their own RMD obligation, and specific rules govern how these are calculated, withdrawn, and what happens upon the death of a spouse.

Calculating RMDs for Each Spouse

Each spouse must calculate their RMD separately based on their own retirement account balances. This calculation is performed annually and is based on the fair market value of the individual’s accounts as of December 31 of the preceding year. To determine the RMD amount, the prior year-end account balance is divided by a life expectancy factor from the IRS’s Uniform Lifetime Table.

For example, consider a 75-year-old husband with $500,000 in his traditional IRA and a 74-year-old wife with $400,000 in her IRA. Using the Uniform Lifetime Table, the husband’s distribution period is 24.6, resulting in an RMD of $20,325. The wife’s distribution period is 25.5, leading to an RMD of $15,686.

An exception exists if a spouse’s sole beneficiary for their entire interest in the IRA is their spouse who is more than 10 years younger. The account owner can use the IRS’s Joint Life and Last Survivor Expectancy Table instead of the Uniform Lifetime Table. This table often provides a larger life expectancy factor, which results in a smaller required withdrawal.

Satisfying RMD Obligations Across Accounts

Spouses cannot combine their total RMD amounts and take the full distribution from just one person’s account. The husband’s RMD must be satisfied from his accounts, and the wife’s RMD must be satisfied from hers. This individual responsibility remains regardless of whether the couple files their income taxes jointly.

While a couple cannot aggregate their RMDs, an individual spouse with multiple retirement accounts has some flexibility. If a person has several traditional IRAs, SEP IRAs, or SIMPLE IRAs, they must calculate the RMD for each account separately. They can then add these individual RMD amounts together and withdraw the total sum from any one or a combination of their own IRA accounts.

This aggregation rule does not extend to all retirement plans. For workplace retirement plans like 401(k)s, the RMD for each plan must be calculated and withdrawn from that specific account. In contrast, an individual with multiple 403(b) accounts can calculate the RMD for each, add them together, and then withdraw the total from any one or more of their 403(b) accounts.

RMD Rules for a Surviving Spouse

When a spouse passes away, the surviving spouse is considered an “Eligible Designated Beneficiary” and has several options for managing the deceased’s retirement assets.

Spousal Rollover

One common choice is to execute a spousal rollover, where the deceased’s retirement assets are moved into the surviving spouse’s own IRA. By rolling the funds over, the surviving spouse treats the assets as if they were always their own. Future RMDs are then based on the survivor’s age and calculated using the Uniform Lifetime Table, which can be advantageous for a younger surviving spouse as it may delay the start of their own RMDs.

Inherited IRA

Alternatively, the survivor can treat the account as an inherited IRA. As an Eligible Designated Beneficiary, the surviving spouse can choose to take distributions over their single life expectancy. A rule change allows the surviving spouse to elect to calculate these RMDs using the more favorable Uniform Lifetime Table instead of the Single Life Table, which can result in smaller required withdrawals.

If the deceased spouse had not yet started taking RMDs, the surviving spouse can delay starting distributions until the year the deceased would have reached RMD age. An inherited IRA also gives the surviving spouse the option to withdraw the entire account balance by the end of the tenth year following the original owner’s death.

Tax Reporting for RMDs

The financial institution that holds the retirement account is responsible for reporting the distribution. They will issue a Form 1099-R, “Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.,” to both the distribution recipient and the IRS. This form details the gross amount of the distribution and indicates how much, if any, is taxable.

The information from Form 1099-R is then transferred to the recipient’s individual income tax return, Form 1040. Unless the account contains after-tax contributions, distributions from traditional, pre-tax retirement accounts are taxed as ordinary income. This means the withdrawal is added to the taxpayer’s other income for the year and taxed at their marginal income tax rate. It is important to plan for this additional income, as it can push a taxpayer into a higher tax bracket.

Failure to take the full RMD amount can result in a penalty of 25% of the shortfall. However, this penalty can be reduced to 10% if the mistake is corrected in a timely manner.