He Had Three Old 401(k)s at 73 and Took One Big RMD From the Largest. The IRS Doesn’t Let 401(k)s Aggregate, and Fined Him on the Other Two.

He Had Three Old 401(k)s at 73 and Took One Big RMD From the Largest. The IRS Doesn’t Let 401(k)s Aggregate, and Fined Him on the Other Two.

David Beren

Mon, August 31, 2026 at 6:11 PM GMT+3 5 min read

Quick Read

• Unlike IRAs, each 401(k) plan requires its own RMD calculation and withdrawal. Taking extra from one never satisfies the obligation on another.

• SECURE 2.0 cut the missed-RMD excise tax from 50% to 25%, dropping to 10% if corrected within two years by filing Form 5329.

• Rolling old 401(k)s into a single traditional IRA before age 73 eliminates the aggregation trap, since IRAs can pool balances for one combined RMD.

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

A 73-year-old retiree with three old 401(k) accounts from previous employers took his full required minimum distribution from the largest plan, assumed he was done, and later received a notice from the IRS assessing a penalty on the two accounts he did not touch. The mistake is one of the most common and expensive in retirement planning, and it stems from a rule that treats 401(k) plans differently from every other retirement account most people own.

Aggregation Rule Only Works for Some Accounts

A required minimum distribution, or RMD, is the amount the IRS forces retirees to withdraw each year from tax-deferred accounts once they reach the required beginning age. The calculation uses the prior year-end balance and an IRS life expectancy factor. What trips people up is where the money actually has to come from.

For traditional IRAs, the IRS lets owners calculate the RMD separately for each account and then withdraw the combined total from any one IRA or split it across several. That is aggregation. For 403(b) tax-sheltered annuities, aggregation is also allowed, but only with other 403(b) accounts. For 401(k) plans, aggregation is not allowed. Each 401(k) plan stands alone. The RMD must be calculated for that specific plan and taken from that specific plan. Pulling extra from one 401(k) does not satisfy the obligation on another, even if both are old accounts from prior employers sitting at the same custodian.

Many retirees make this error because they learned the IRA rule first and assumed it applied everywhere. It does not.

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Age 73 Puts Him in the SECURE 2.0 Cohort

Under the SECURE 2.0 Act of 2022, the required beginning age depends on birth year. Anyone born between 1951 and 1959 has a required beginning age of 73. Anyone born in 1960 or later has a required beginning age of 75. A retiree who is 73 in 2026 falls squarely in the first group, so the first RMD is due for the current tax year, with a one-time option to defer that initial distribution until April 1 of the following year.

Reduced Excise Tax Under SECURE 2.0

Before SECURE 2.0 came along, the excise tax on a missed RMD was a brutal 50% of whatever you failed to withdraw. SECURE 2.0 dialed that down to 25% of the shortfall, and it drops to 10% if you catch and correct it within a two-year window. So if you neglected two 401(k) accounts with combined missed distributions of $20,000, that mistake automatically triggers a $5,000 excise tax bill, or $2,000 if you fix it quickly, and that is on top of the regular income tax you still owe on the money itself.

Correction does not happen automatically. You or your estate have to withdraw the missed amount, report the shortfall on Form 5329 attached to your federal return, and either pay the excise tax or request a waiver for reasonable cause by explaining the situation right on the form. The IRS tends to grant those waivers when the error was inadvertent, the money has been distributed, and your tax history is clean. The takeaway if you just discovered the mistake is that it is fixable, but the clock is ticking. This is one of nine IRS rules that quietly drain retirement accounts, all charted in a free tax trap map.

Consolidation Removes the Trap

Rolling old employer 401(k) plans into a single traditional IRA before the required beginning date eliminates the aggregation problem entirely because IRAs pool for RMD purposes. That produces a single balance, a single calculation, and a single withdrawal, which is why many advisors, including Suze Orman in her pre-RMD commentary, argue for consolidation well before age 73.

Some retirees choose to keep a 401(k) rather than roll it over. Money in a workplace 401(k) is generally accessible without the 10% early withdrawal penalty starting at age 55 if the participant separates from service in that year or later, versus 59 and a half for IRAs. ERISA-covered 401(k) balances also carry stronger federal creditor protection than IRAs in some circumstances, and IRA protection varies by state. Employer plans may also offer institutional-class funds or a stable value option not available in retail IRAs. None of that helps with the aggregation issue, but it explains why the answer is not always to consolidate.

What the Broader Environment Looks Like

The 2027 Social Security cost-of-living adjustment is tracking toward 3.1%, the 10-year Treasury yield sits at 4.67% as of August 27, 2026, and the University of Michigan consumer sentiment index reads 55.2 for July 2026. In an environment where retirees are watching every dollar, an excise tax on a shortfall from two forgotten 401(k) accounts is the kind of avoidable loss that consolidation, or simply taking each 401(k) RMD separately, is designed to prevent.

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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