Retirement accounts come with a built-in deadline that catches some savers off guard. Once a person reaches a certain age, the government requires them to start pulling money out of most tax-deferred accounts each year and pay income tax on it, whether the money is needed or not. Those forced withdrawals are called required minimum distributions, and they can push a retiree into a higher tax bracket or raise the cost of Medicare. For older Americans who keep working past that age, one narrow exception can quiet the demand on a single account, buying more time for the money to grow untouched.
When the withdrawals normally begin
Required minimum distributions, or RMDs, generally start at age 73. According to the Internal Revenue Service, a saver must begin taking annual withdrawals from traditional IRAs and most employer plans once they reach that age, with the first distribution due by April 1 of the year after turning 73 and each later one by December 31. The amount is calculated from the account balance and an IRS life-expectancy factor, and the penalty for missing a withdrawal has historically been steep, so the deadlines are not optional for the accounts they cover.
These rules exist because traditional retirement accounts were funded with pre-tax dollars. The government deferred the tax for decades, and RMDs are how it eventually collects. That logic applies to traditional IRAs, SEP and SIMPLE IRAs, and the balances left behind in old 401(k) and 403(b) plans, all of which fall under the age-73 clock regardless of whether the account holder is retired.
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The still-working exception, and its narrow shape
The exception applies to just one kind of account: the workplace plan of a current employer. The IRS explains that a participant in a workplace retirement plan, such as a 401(k), can delay taking RMDs until the year they retire, provided the plan allows it and the worker is not a 5% owner of the business sponsoring it. In practice, that means a person who is 74 and still on the payroll may be able to leave the balance in that employer’s plan alone, with no required withdrawal, until the year the job actually ends.
Two limits keep the exception from being broader than it looks. First, it covers only the plan of the employer a person still works for. It does nothing for IRAs, which must begin distributions at 73 no matter what, and it does nothing for 401(k) balances sitting at former employers, which remain on the normal schedule. Second, a saver who owns more than 5% of the sponsoring business is excluded and must begin distributions at 73 like everyone else. The plan document itself also has the final word: a plan is permitted to require distributions at 73 even for still-working employees, so the exception applies only if the specific plan offers it.
Why a delay can be worth pursuing
Deferring an RMD from a current 401(k) does two useful things. It keeps that year’s distribution off the tax return, which can matter for a worker who is already drawing a salary and would rather not stack a forced withdrawal on top of it. And it lets the balance continue growing tax-deferred instead of being drawn down on a fixed schedule. For someone who plans to work into their mid-70s, several years of continued deferral on a sizable balance can be meaningful.
There is a well-known maneuver that widens the benefit. Because the exception applies only to a current employer’s plan, some still-working savers roll old IRA and former-employer balances into their current 401(k) before reaching 73, if that plan accepts incoming rollovers. Doing so folds those dollars under the same still-working umbrella, potentially delaying RMDs on the combined balance until retirement. The strategy depends entirely on the current plan permitting both the rollover and the delay, so it calls for confirming the plan’s rules in advance rather than assuming.
Confirming the details before counting on it
The safest step for any worker approaching 73 is to ask the plan administrator two direct questions: does this plan allow a still-working participant to delay RMDs, and does it accept rollovers from IRAs or prior plans. The answers vary from employer to employer, and getting them in writing avoids an expensive surprise. It is also worth remembering that the reprieve ends the moment employment does. In the year a worker retires, the delayed RMD from that final plan comes due, and the normal December 31 deadlines resume for every account.
Roth accounts sit outside this entire discussion during the owner’s lifetime, so they are not the concern here. For traditional balances, the still-working exception is a legitimate, IRS-sanctioned way to keep one account growing a little longer, as long as the worker is genuinely employed, is not a major owner of the company, and confirms that the plan permits the delay. Used with a clear eye on those conditions, it is a modest but real lever for a retiree who is not ready to stop working, or to start withdrawing.
This article was produced with AI assistance and reviewed by The Financial Wire editorial team.
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Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
