RMD Rules Unveiled: What You Need to Know at 77 and Still Working

Reaching age 77 and still working? You might be wondering about the rules surrounding Required Minimum Distributions (RMDs). These regulations can be a bit complex and depend on various factors, including your age, the type of account, and your employment status. Recent changes in these rules add another layer of complexity. So, let’s delve into the minimum distribution requirements. And remember, if you need guidance on retirement planning, RMDs, or any financial matters, consulting a financial advisor is always a wise choice.

Demystifying RMDs: Who, When, and How Much

The IRS won’t permit you to keep your retirement savings in tax-deferred accounts indefinitely. Instead, they mandate that you withdraw a specific amount annually. The required amount is determined by your age and the account’s balance at the end of the prior year.

Traditionally, RMDs used to commence at age 70 ½, but the SECURE Act of 2019 extended this age to 72. However, this increase was relatively short-lived, as the SECURE Act 2.0 has further raised the RMD age to 73, starting in 2023, with plans to raise it again to 75 by 2033.

It’s important to note that RMDs are generally required for most tax-advantaged retirement accounts, with Roth IRAs being a notable exception.

Formerly, designated Roth accounts within employer-sponsored plans were still subject to RMD rules. However, the SECURE Act 2.0 has addressed this issue, ensuring that no Roth accounts will be subject to age-based RMDs from 2024 onward. It’s worth mentioning that inherited Roth accounts are still subject to the 10-year rule. If you have further questions about retirement, a financial advisor can help you navigate the complexities.

Still Employed? An Exception to RMDs

If you’re still employed, you qualify for an exception: you are not obligated to take RMDs from your current employer-sponsored retirement plan. However, this exemption does not apply to all your retirement accounts.

You will still need to take RMDs from:

IRA accounts, including SIMPLE and SEP IRAs
Other retirement plans in which you are no longer an active participant

If you possess a 401(k) from a previous employer, it’s crucial to ensure you are meeting RMD requirements for that account. An effective way to avoid RMDs for an old account is to consider rolling those funds into your current employer’s plan, provided it’s allowed. For personalized advice on RMD planning, consider collaborating with a financial advisor.

In Conclusion: Your RMD Obligations

Given your current employment status, you are not obliged to take an RMD from your existing employer’s retirement plan. Additionally, Roth accounts are exempt from RMDs. However, it’s crucial to remember that RMDs are still applicable to any retirement account from a former employer. Stay informed and, if needed, seek professional guidance from a financial advisor to make the most of your retirement planning.