retirement

A Little-Known Way to Delay RMDs in Retirement

If you roll 401(k) accounts from former employers into your current employer’s plan, you may be able to hold off on required minimum distributions.

I am 74 years old and still working. I’m taking required minimum distributions from an old employer’s 401(k), but I’m still contributing to my current employer’s 401(k). Can I roll the money from my old employer’s 401(k) into my current employer’s plan and delay taking RMDs on the money?

Yes, if your current employer allows you to roll move money from other accounts into its plan. In that case, you can transfer the money from your old 401(k) to your current 401(k) and avoid taking RMDs on that money while you’re still working there.

You must take RMDs from traditional IRAs and former employers’ 401(k)s after you turn 70 ½, but you don’t have to take RMDs from your current employer’s 401(k) while you’re still working in that job no matter how old you are (unless you own 5% or more of the company). “Not all plans accept roll-ins, but most do,” says Tim Driscoll, a director of defined contribution product management for Fidelity.

Have the money transferred directly from one plan to the other to avoid a tax bill or penalty on the rollover. Ask your current employer’s 401(k) administrator about how to move the money.

You won’t be able to avoid this year’s RMD from your old employer’s 401(k), however. “The minimum required distribution for the year must be withdrawn from the former employer’s plan before any amounts would be eligible for the rollover,” says Driscoll. After you take the RMD for the year, though, the rest of the money can go into your current employer’s 401(k).

For more information about the rules, see How Working Past 70 Affects Retirement Savings. Also see our Required Minimum Distributions special report.

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
25 Best Kirkland Products You Should Buy at Costco
Smart Buying

25 Best Kirkland Products You Should Buy at Costco

Many of warehouse club Costco's store-branded Kirkland Signature items get high marks for quality and value. Check out our picks.
July 21, 2021
Warning: You May Have to Pay Back Your Monthly Child Tax Credit Payments
Tax Breaks

Warning: You May Have to Pay Back Your Monthly Child Tax Credit Payments

Unlike stimulus checks, you might have to repay your monthly child tax credit payments if you get too much money from the IRS.
July 16, 2021

Recommended

Are You Itching for an Earlier-Than-Expected Retirement?
retirement planning

Are You Itching for an Earlier-Than-Expected Retirement?

Lots of folks are pulling the rip cord on their careers sooner than they had initially planned. Before you rush to join them, make sure you are really…
July 30, 2021
How Patients with Lasting Symptoms of COVID Can Apply for Disability
Financial Planning

How Patients with Lasting Symptoms of COVID Can Apply for Disability

Those who can no longer work because of COVID-19 may qualify for these benefits but the approval process can be a difficult road.
July 30, 2021
Older Adults Battle Long-Term Effects of COVID-19
Financial Planning

Older Adults Battle Long-Term Effects of COVID-19

Seniors are more likely to suffer from long COVID, and it's unclear when, or even if, they will fully recover.
July 29, 2021
Retirement Can Keep You Busy
Empty Nesters

Retirement Can Keep You Busy

Your lives are filled with jobs, creative ventures and intellectual enjoyment.
July 29, 2021