How to Postpone a Required 401k Withdrawal While Still Working


Retirement is a big part of the American dream. However, retirement planning in the 21st century requires more than a passing knowledge of accounting and tax law, and navigating the maze of IRAs, Roth IRAs, 401ks, pre-tax contributions and required minimum distributions can be difficult. Having a basic understanding of Internal Revenue Service regulations when thinking about when to retire and how to make your retirement funds last as long as possible can simplify your decision making.

Continue working past age 70.5. Usually retirement account holders must take required minimum distributions from their accounts when they turn 70.5. However, IRS regulations allow individuals who are still working after age 70.5 to be exempt to RMDs for the 401k retirement account associated with that job. There is no minimum number of hours worked to be eligible for this deferment of RMDs, so part-time work does count, but you must start taking RMDs the year you retire.

Do not take any RMDs from the 401k account associated with your current job. You are not required to fill out any forms or notify the IRS to defer RMDs due to non-retirement. Note, however, that you still must take the legally required RMDs in any other 401k or traditional IRA accounts, as the not-retired exemption only applies to the 401k from your current job. Roth IRAs are not subject to RMDs.

Contact the human resources department at your job a few months before you turn 70.5 to confirm that you plan to continue working. You may legally continue making contributions to your 401k account as long as you are working, so also double-check with human resources to make sure that your contributions will continue uninterrupted.

Tips & Warnings

  • You can roll over an IRA that will require RMDs after age 70.5 into your current work 401k and avoid having to take the RMDs, but you lose the tax benefits and flexibility of an IRA. Check with a retirement specialist so you can get a better idea of the big picture before you make any final decisions.
  • Some company retirement plans do not allow participation past a certain age, and some companies still have mandatory retirement ages as company policy. Check with your employer's human resources department to find out your company's policies about retirement.

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