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.
Most retirees who own multiple old 401(k)s assume the same tax rules that govern their IRAs apply everywhere, and that assumption alone can turn a careful withdrawal strategy into an unexpected IRS penalty notice.
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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 flows 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 flexibility is aggregation. For 403(b) tax-sheltered annuities, aggregation is also permitted, but only with other 403(b) accounts. For 401(k) plans, the rule is categorically different: aggregation is not allowed. Each 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 when both are old accounts from prior employers sitting at the same custodian.
Many retirees commit this error because they learned the IRA rule first and assumed it applied universally. It does not.
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, the excise tax on a missed RMD was a punishing 50% of whatever went undistributed. SECURE 2.0 cut that to 25% of the shortfall, and the rate drops further to 10% if the account owner catches and corrects the error within a two-year window. So if two forgotten 401(k) accounts together carried a combined missed distribution of $20,000, the initial excise tax bill comes to $5,000, or $2,000 with a timely fix. That liability sits on top of the ordinary income tax still owed on the underlying money.
Correction requires active steps. The account owner (or the estate) must withdraw the missed amount, report the shortfall on Form 5329 attached to the federal return, and either pay the excise tax or request a reasonable-cause waiver by explaining the circumstances directly on the form. The IRS generally grants those waivers when the error was inadvertent, the money has since been distributed, and the filer’s tax history is clean. The mistake is fixable, but the correction window is finite. 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. The result is a single balance, a single calculation, and a single withdrawal. That simplicity is why many advisors argue for consolidation well before age 73.
Some retirees have legitimate reasons to keep a 401(k) rather than roll it over. Assets in a workplace plan are generally accessible without the 10% early withdrawal penalty starting at age 55 if the participant separates from service in that year or later, compared with age 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 significantly by state. Employer plans may also offer institutional-class funds or a stable value option unavailable in retail IRAs. Those are real advantages, but none of them resolve the aggregation problem.
What the Broader Environment Looks Like
The 2027 Social Security cost-of-living adjustment is currently tracking between 3.5% and 3.6%, according to estimates from the Senior Citizens League, independent analyst Mary Johnson, and AARP, with the official announcement scheduled for October 14, 2026. The 10-year Treasury yield closed September at approximately 5.29%, near its highest level since 2002, and the University of Michigan consumer sentiment index fell to 48.1 in September 2026, a four-month low. In an environment where retirees are scrutinizing every dollar, an excise tax on shortfalls from two forgotten 401(k) accounts is precisely the kind of preventable loss that consolidation, or simply taking each 401(k) RMD separately and on time, is designed to avoid.
Editor’s note: This update corrects the projected 2027 Social Security COLA from 3.1% to the current consensus estimate of 3.5% to 3.6%, updates the 10-year Treasury yield from 4.67% (August 27, 2026) to approximately 5.29% (September 30, 2026), and replaces the University of Michigan consumer sentiment figure of 55.2 for July 2026 with the final September 2026 reading of 48.1.
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David Beren has been a Flywheel Publishing contributor since 2022. Writing for 24/7 Wall St. since 2023, David loves to write about topics of all shapes and sizes. As a technology expert, David focuses heavily on consumer electronics brands, automobiles, and general technology. He has previously written for LifeWire, formerly About.com. As a part-time freelance writer, David’s “day job” has been working on and leading social media for multiple Fortune 100 brands. David loves the flexibility of this field and its ability to reach customers exactly where they like to spend their time. Additionally, David previously published his own blog, TmoNews.com, which reached 3 million readers in its first year. In addition to freelance and social media work, David loves to spend time with his family and children and relive the glory days of video game consoles by playing any retro game console he can get his hands on.
