Are you still working past the age of 73 and wondering whether you need to take required minimum distributions (RMDs) from your retirement accounts? You’re not alone. A recent question on the “Women & Money” podcast brought this issue to light, and financial expert Suze Orman had plenty to say about it.
A listener named Janet wrote in with a common concern: she recently turned 76 and was told that as long as she’s working full-time, she doesn’t need to start RMDs. However, now that she’s considering retirement, she wants to know what to do next.
Orman’s response depends on the type of retirement account Janet has. According to Orman, the rules vary depending on whether your retirement savings are in an employer-sponsored plan or an Individual Retirement Account (IRA).
“If you’re working and the RMDs are from your employer’s plan, your 401K, 403, or thrift savings plan, you do not have to start taking them at 73,” Orman explained. These employer-sponsored accounts are exempt from RMDs until you retire, as long as you’re still employed by the company that sponsors the plan.
However, this rule does not apply to IRAs. “If you have any IRAs or you only have IRAs, you have to take RMDs from the IRAs even if you are working full time,” Orman said. So if Janet has money in an IRA and hasn’t been taking her RMDs, she may already be behind.
Missing an RMD doesn’t automatically result in a steep penalty, but it’s important to act quickly. Orman suggests taking the missed distribution right away and working with a CPA to file the appropriate forms with the IRS. “The IRS may waive the penalties entirely if she can show reasonable cause,” she said. However, timing and documentation matter, so professional help is recommended.
Another question that came up on the podcast was whether you can contribute to a retirement account while still working and taking RMDs. The answer is yes — if you have earned income, you can still contribute to certain accounts, such as a SEP IRA if you’re self-employed. However, Orman cautioned that just because you can contribute doesn’t mean you should, especially if you expect higher tax rates in retirement.
The most important thing is to understand what kind of retirement accounts you hold. If your money is in a 401(k) and you’re still working for the company that sponsors it, you can likely delay your RMDs. But if your savings are in an IRA, the RMD clock starts ticking at 73 — regardless of your employment status.
When in doubt, it’s best to consult with a CPA or financial advisor who can help you navigate the rules and avoid costly mistakes. Remember, it’s never too late to start planning for your retirement and ensuring that you’re making the most of your savings. All rights reserved.
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