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

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 starts expecting a slice of the pre-tax money that has been compounding untouched for decades. The mechanics look straightforward on paper: calculate the required amount, take the withdrawal, and report it on the return. Real-world account structures complicate that picture, and one woman’s story illustrates exactly how.

Heading into the year, she had three accounts to manage: two old 401(k)s from previous employers and a traditional IRA she opened after leaving her last job. She ran the numbers carefully and arrived at the correct total RMD figure across all three. Then she took the full amount as a single distribution from the IRA, filed her return, and assumed she was done. She was not. Two of those three accounts still owed the IRS their own separate distributions. She had satisfied the IRA’s requirement, but each 401(k) remained untouched.

The Aggregation Rule That Traps Retirees

The rule that catches most retirees off guard is surprisingly narrow. With traditional IRAs, aggregation is permitted. You calculate the total amount owed across all your IRAs, then pull that full sum from just one of them. The 401(k) world operates differently. Each 401(k) must generate its own separate RMD, calculated on that plan’s balance and satisfied by a withdrawal directly from that plan’s assets. An IRA distribution, no matter how large, counts only toward the IRA’s RMD requirement. It cannot substitute for a 401(k) distribution under any circumstances.

That distinction is precisely where the penalty originated in this case. The IRA withdrawal satisfied the IRA’s required distribution. The two 401(k)s went untouched, and each one triggered its own excise tax for the year. The extra dollars pulled from the IRA generated ordinary income tax with no offsetting benefit to the 401(k) shortfalls.

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 mistake within the two-year correction window and files Form 5329, the rate can fall further to 10%. On top of that excise tax, ordinary income tax applies to the shortfall when it is finally distributed.

For a retiree drawing down a lifetime of savings, the effect registers immediately. The Bureau of Labor Statistics Consumer Expenditure Survey put average annual expenditures at $78,535 in 2024, up from $77,158 in 2023. A four-figure penalty lands meaningfully against that spending baseline, which is why catching the error early and invoking the correction window matters.

Why Consolidation Changes the Math

The most direct way to avoid the aggregation trap is to reduce the number of accounts that each generate a separate RMD calculation. Rolling old 401(k) balances directly into a single traditional IRA collapses what would be three separate RMDs into one figure, calculated on a single combined balance and satisfied by a single distribution. When the transfer is structured as a trustee-to-trustee rollover, it does not itself count as an RMD, provided the account holder first takes the year’s required 401(k) distribution before the money moves.

Consolidation also reduces the administrative risk that comes with tracking multiple custodians, multiple deadlines, and multiple year-end balances. Each additional account is another variable that can generate a missed distribution, and the penalty for each is independent. Financial planners working with clients near 73 routinely flag this as a priority review item, precisely because the IRS offers no relief for good-faith arithmetic errors that cross account types.

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 and more complex variable in most retirement budgets. Coverage across the financial press this year has zeroed in on the same pattern: AARP has warned Americans about costly 401(k) and IRA mistakes, and outlets including SmartAsset have published pieces on RMD errors and inherited-account traps. The aggregation quirk is one of several IRS rules that quietly erode retirement accounts. We charted the full list in a free tax trap map for retirees.

SECURE 2.0 also reshaped the pre-RMD accumulation side. Starting in 2026, employees age 50 and older who earned more than $150,000 in FICA wages from their plan sponsor in the prior year must direct catch-up contributions into a Roth 401(k) rather than a pre-tax account. That shift reduces future pre-tax balances for high earners, since Roth 401(k) assets are no longer subject to RMDs during the original owner’s lifetime under SECURE 2.0.

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 and drawn from that plan’s assets.
2. Consolidate old 401(k)s into a single traditional IRA through a direct trustee-to-trustee rollover after the year’s 401(k) RMD is satisfied. Fewer accounts mean fewer separate calculations in subsequent years and a single aggregated RMD going forward.
3. If an RMD is missed, file Form 5329 with a reasonable-cause statement as promptly as possible. Correcting within the two-year window can reduce the excise tax from 25% to 10%.

For anyone approaching 73 with more than one workplace plan still open, the aggregation rule generates a separate obligation for each 401(k). The account structure is the one variable the retiree controls, and the time to simplify it is before the first RMD deadline arrives, not after.

Editor’s note: This article corrects the 2023 BLS Consumer Expenditure Survey average from $77,280 to the official figure of $77,158, and updates the SECURE 2.0 Roth catch-up contribution language to reflect the current $150,000 FICA wage threshold confirmed for 2026.

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