Login | May 28, 2026
Readers Ask Tough RMD Questions
Julie Jason
Published: May 28, 2026
A reader who is 74 decided to contribute to the 401(k) at his new employer, having just started a new job after contributing to his former employer’s 401(k).
You might guess “Richard’s” question: How do “RMDs” work? These are the mandated withdrawals that must be taken each year after reaching age 73 -- but the rule does not apply in certain cases if you are “still working.”
This looks like a simple question, but it isn’t, and there are penalties to be paid if the facts and circumstances differ even a hair. For that reason, anyone in this position needs to retain tax counsel before making a decision. The best I can do here is point out some resources for you.
The starting point of the RMD discussion is Internal Revenue Code Section 401(a)(9)(C), which establishes the rules for RMDs. The required beginning date (RBD) for employees to begin taking RMDs is “April 1 of the calendar year following the later of (I) the calendar year in which the employee attains applicable age, or (II) the calendar year in which the employee retires” (tinyurl.com/5b737t2d).
The SECURE 2.0 Act of 2022 (tinyurl.com/5ehrjeyj) has set the current “applicable age” at 73. (It changes to age 75 in 2033, affecting those who were born on Jan. 1, 1960, or later -- tinyurl.com/4cm98ktw.)
There are some important conditions when it comes to the clause “the calendar year in which the employee retires.” Citing IRS Publication 575, “Pension and Annuity Income” (tinyurl.com/4a8k2ew9):
-- You have an employer-sponsored retirement account with the company for which you are currently working. (The SmartAsset article “I’m 75 and Still Working. Can I Avoid Taking RMDs?” points out that you must be “employed by the company, not contracting” -- tinyurl.com/464hykan.)
-- Previous workplace retirement accounts and IRAs are NOT eligible for delayed RMDs.
-- If you own 5% of the business you are working for, “you must begin to receive distributions from the plan by April 1 of the year that follows the calendar year in which you reach age 73.”
-- Even if you don’t own 5% of the business, your company’s plan might not allow you to wait -- it could require you “to begin to receive distributions by April 1 of the year that follows the year in which you reach age 73 even if you haven’t retired.”
At this point, the critical questions to answer are:
1) Can Richard wait to do RMDs on his current 401(k) until he retires from that company? The answer should be “yes” if he is not a 5% or more owner of the company, but only if the new plan allows this option.
2) Is there a way that Richard can delay RMDs on his old 401(k)? That would be foolhardy, since the “still working” exception applies to your current job.
3) Is there another path to avoiding RMDs on the old 401(k)? Possibly. Consider rolling the old 401(k) into the new one? For starters, his current company’s 401(k) plan must allow rollovers from other plans, so he will need to check with the plan sponsor or the company’s human resources department, as well as the company that has his previous 401(k) to make sure it allows a rollover to occur. Plus, Richard will likely need to take an RMD from his previous 401(k) account before he can roll over the remainder of the funds. (His adviser will check the “first dollar rule,” found in Treasury Regulation 1.402(c)-2, Q&A-7 -- tinyurl.com/me4hw2ep.) The IRS webpage “Rollovers of retirement plan and IRA distributions” provides additional details (tinyurl.com/mryuv93f).
Again, the possibilities to avoid RMDs in the new job look good. Potentially, if Richard’s tax adviser agrees, there may be a chance to protect the assets from the old 401(k) as well.
As the Charles Schwab article “Working in Retirement: Effect on Savings and RMDs” points out: “Working after retirement can raise financial questions ... it is important that you understand how the rules could affect you if you get back on the job” (tinyurl.com/3zuuw2nw). Talk to your tax adviser.
Seasoned investment counsel (tinyurl.com/52nus8hz) and award-winning columnist and author, Julie Jason, JD, LLM, promotes financial literacy and investor protection. Read her latest book, "The Discerning Investor: Personal Portfolio Management in Retirement for Lawyers (and Their Clients)" (tinyurl.com/4u7h9pjs), published by the American Bar Association. Write to Julie at readers@juliejason.com. While all questions cannot be answered, each email is read and reviewed and can lead to discussion in a future column.
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