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I am 77 years old and I asked my 401(k) fund manager to set up my RMD. I was told that I don’t have to withdraw my money if I am still employed. Please confirm if this is in fact an IRS rule or that of the fund management company?
-Bea
That’s right, Bea. If you are still employed, you do not need to take a required minimum distribution (RMD) from your current 401(k), regardless of your age, as long as your employer does not require it. That is actually a rule of the Tax Authorities.
RMD requirements depend on your age, account type, and whether you are still employed. There have been some changes to these rules recently, so let’s take a look at the minimum distribution requirements. (And if you need help planning for retirement, including RMDs, consider talking to a financial advisor.)
The IRS does not allow you to leave your retirement savings in tax-deferred accounts indefinitely. Instead, the government requires you to withdraw a certain amount from your accounts each year. The amount you need to withdraw is based on your age and how much money was in your account at the end of last year.
Before the SECURE Act of 2019, RMDs began at age 70 ½. However, the law increased the RMD age to 72 years.
However, that increase was short-lived. The SECURE Act 2.0 increased the RMD age to 73 years starting in 2023 and set to increase it to 75 years in 2033.
You are required to take an RMD from most tax-advantaged retirement accounts, with the exception of Roth IRAs.
Under prior law, designated Roth accounts within employer-sponsored plans such as Roth 401(k)s and Roth 403(b)s were still subject to RMD rules. However, the SECURE Act 2.0 addressed this shortcoming, and beginning in 2024, no Roth accounts will be subject to age-based RMDs. I specify “age-based” here to recognize that inherited Roth accounts are still subject to the 10-year rule. (And if you have other retirement-related questions, this tool can help you find potential financial advisors.)
Here is the exception that applies to you. If you are still employed, you do not need to take RMDs from the plan your current employer sponsors.
But even if you’re still working, you’ll still need to carry RMDs from:
So if you have a 401(k) from a former employer, be sure to take RMDs out of that account. A good solution to avoid RMDs on an old account is to simply transfer those funds to your current plan if allowed. (And if you need help planning your RMDs, consider working with a financial advisor.)
Because you are still employed, you do not need to take an RMD from your current employer’s retirement plan. RMDs also do not apply to Roth accounts. However, you will still need to take an RMD if you still have a retirement account from a former employer.
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Brandon Renfro, CFP®, is a financial planning columnist at SmartAsset, answering reader questions about personal finance and tax topics. Do you have a question that you would like answered? Email AskAnAdvisor@smartasset.com and your question may be answered in a future column.
Please note that Brandon is not a participant in the SmartAsset AMP platform, nor an employee of SmartAsset, and has received compensation for this article.
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The message Ask an advisor: I’m 77 and still working. Is it true that I don’t need to take RMDs? first appeared on SmartReads by SmartAsset.
