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Contributing to Retirement Accounts When You Haven't Fully Retired

Some part-timers can keep socking money in a 401(k) and avoid required minimum distributions. It depends on your plan's rules.

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QIf I "retire" from full-time work but continue with the same employer part-time, can I still contribute to my company's 401(k), or do I have to stop at age 70½? Also, can I avoid having to take RMDs at age 70½ because I’m still working there, or do I need to work a certain number of hours to qualify?

AEmployers can't prevent employees from participating in their 401(k)s just because they reach a certain age, so you should be able to contribute even after age 70½ if you qualify otherwise. However, some employers let part-time workers participate in their 401(k)s while others do not, and the number of hours required to be eligible can vary by employer, too, says Keith McGurrin, a certified financial planner with T. Rowe Price.

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If you are working enough hours to participate, you can still make contributions and may also be able to delay taking RMDs -- although those rules vary by plan, too. "Some employees who continue working at their employer past age 70½ find themselves eligible to continue making plan contributions but also having to take RMDs at the same time," says McGurrin. If your employer doesn't permit part-time workers to participate in the plan, you will need to start taking your required minimum distributions at age 70½.

If you switch to working as a consultant and are considered a self-employed independent contractor rather than an employee, you usually won't be eligible to contribute to the employer's 401(k) and you'd have to start taking RMDs from the plan at age 70½. Self-employed people can contribute to a solo 401(k) at any age, but you will have to start taking RMDs from the solo 401(k) at age 70½, too. The reason: You can't delay taking RMDs even while working if you own more than 5% of the company. See Tax-Smart Ways to Save When You’re Too Old for a Traditional IRA for more information.

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Whether or not you're still working, you'll need to start taking RMDs from your traditional IRAs after you turn 70½. You can't make new contributions to traditional IRAs after age 70½, but you can contribute to a Roth IRA at any age if you have earned income from a job.

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