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Working Past Age 73 – What Happens to Your RMD?

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As people live longer, working past the traditional retirement age is becoming more common. If you are healthy and are happy with your job, there’s no reason to stop working if you don’t want to! But if you decide to keep working past age 73, there is some important retirement planning you’ll need to do if you have any tax-deferred retirement savings accounts.

Required Minimum Distribution Basics

According to the IRS, participants in IRAs and employee retirement plans must take their required minimum distribution (RMD) by April 1 of the year after they turn 73 (if you reach age 72 after Dec. 31, 2022). The size of these RMDs is determined by a table published by the IRS known as the Uniform Lifetime Table. But if you are still working  - and intend to keep working - at age 73, there are some exceptions and additional rules you should be aware of.

No Delay for IRA Required Minimum Distributions

For traditional and employer-sponsored IRAs (excluding Roth IRAs), all owners must begin taking RMDs at age 73, and must continue taking distributions each year they are alive. There is no exception to this requirement, even if you are still working and have no need to tap into your retirement savings. But there is also no rule about contributing to your SEP or SIMPLE IRA, which you can do at any age while you are still working.

Roth IRAs are an Exception

Roth IRAs are different, as they do not require RMDs at any age, whether you are working or not. You can leave money in a Roth for as long as you’d like. It’s only after you’ve died and your heirs have inherited the Roth that RMDs are required.

Delaying RMDs from Your 401(k)

If you are still working past age 73, you can delay taking RMDs from your current employer's 401(k) plan. This is known as the “still-working exception.” To qualify for this exception, you must be employed year-round at your company, own no more than 5% of the company, and the 401(k) plan you participate in must allow for delayed RMDs. If these qualifications are met, your first RMD will then be due for the year you retire by April 1 of the following year. Keep in mind that if you decide to delay your first RMD until April 1, you will then have to take two RMDs that year – one by April 1 and the second by December 31.

Dying Before Retirement

While not a pleasant thought, if you die before you retire there is no RMD due in the year of death. However, the beneficiaries of your retirement account will be subject to RMDs, though the exact RMD rules differ depending on your beneficiaries’ situation and relationship to you.

We understand that keeping up with these rules can be confusing and tiresome. As financial planners, we are often faced with questions people have about working into their later years – and we’re more than happy to help. If you have questions about working past retirement, we welcome you to connect with us.


1. https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-required-minimum-distributions

2. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds

 

 

 

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