RMD Myths vs. Facts at a Glance
These eight myths collectively lead to missed distributions, unnecessary penalties, inappropriate investment decisions, and missed QCD opportunities. Understanding the correct rules prevents costly mistakes and opens up planning opportunities.
Top RMD myths vs. facts
| Myth | Truth | Cost of Believing It |
|---|---|---|
| Roth IRA has RMDs | Roth IRA has NO RMDs during owner’s lifetime | Unnecessary distributions reduce Roth tax-free growth |
| Annuity eliminates RMDs | Annuity inside IRA does not eliminate RMDs | Expensive fees plus ordinary income tax on distributions |
| You can skip RMD if account loses value | RMD is based on prior year-end balance not current value | Missing the RMD triggers 25% penalty regardless |
| All retirement accounts have same RMD rules | 401ks and IRAs have different aggregation rules | Incorrect calculations cause shortfalls and penalties |
Myth 1: Roth IRA Has Required Minimum Distributions
Completely false. Roth IRAs are exempt from RMDs during the account owner’s lifetime under current law. Since 2024 Roth 401ks are also exempt (SECURE 2.0 change). Believing this myth causes unnecessary Roth IRA distributions that reduce future tax-free compounding — one of the primary advantages of Roth accounts.
While the Roth IRA owner has no RMDs during their lifetime, heirs who inherit a Roth IRA DO have distribution requirements. Non-spouse beneficiaries must generally empty the inherited Roth IRA within 10 years — but the distributions are still tax-free. The Roth advantage continues for heirs.
Additional RMD myths quickly debunked
| Myth | Quick Debunk |
|---|---|
| You must take the same RMD every year | RMD recalculates every year as balance changes |
| Roth conversions eliminate RMDs immediately | Converted amounts take years off but do not instantly eliminate existing balance RMDs |
| You can take your RMD any time during the year | True — but must be completed by December 31 each year |
| IRA custodians automatically calculate and send your RMD | Some do auto-calculations but YOU are responsible for accuracy |
Myth 6: The Same Rules Apply to 401k and IRA RMDs
Important difference: multiple traditional IRAs can have their RMDs aggregated (calculate separately, withdraw the total from any combination). Multiple 401k plans CANNOT be aggregated — you must take the RMD from each 401k plan separately. Confusing these rules leads to shortfalls in 401k RMDs and resulting penalties.
- Myth 5: You can avoid RMDs by continuing to work — the still-working exception applies to 401ks only not IRAs
- Myth 6: IRA and 401k RMDs can be aggregated — they cannot. 401k RMDs must come from each 401k separately
- Myth 7: A large loss in your IRA reduces your RMD for that year — no the prior year December 31 balance determines the RMD
- Myth 8: RMDs from inherited IRAs have the same rules as your own IRA — inherited IRAs often have different and more complex rules
Verify Your RMD Knowledge
Use our calculator to check your RMD calculation against the correct IRS formula.