Most retirement savers know required minimum distributions kick in at age 73 under SECURE 2.0. Far fewer know that one quiet carve-out — the "still-working exception" — can let an employee delay RMDs from their current 401(k) for years past that age. For workers who plan to stay on the job into their mid-70s, the rule can mean tens of thousands of dollars in deferred income tax and a meaningfully smaller forced withdrawal once retirement actually arrives.
How the Exception Works
Under IRS rules, participants in a workplace plan such as a 401(k), 403(b), or governmental 457(b) can postpone RMDs from that plan until April 1 of the year after they finally retire — provided the plan document permits the delay. The age-73 trigger that normally applies to IRAs and former-employer accounts is essentially paused while the employee remains on the payroll.
The exception is narrow and easy to misapply. Three conditions all have to be met:
- The plan must be the one sponsored by the employee's current employer. RMDs from old 401(k)s left behind at prior jobs are not eligible.
- The participant cannot own more than 5% of the company sponsoring the plan. Owners of small businesses, family corporations, and many professional practices are disqualified regardless of how many hours they work.
- The plan document must allow the deferral. Most large-employer plans do, but it is not required by law. Plan sponsors can choose to force RMDs at age 73 for all participants.
What the Exception Does Not Cover
The still-working exception is strictly a workplace-plan benefit. It does not apply to:
- Traditional IRAs, SEP-IRAs, or SIMPLE IRAs — RMDs from these accounts begin at age 73 regardless of employment status.
- 401(k)s held with former employers — those continue under the standard RMD timetable.
- The 5%-or-more owner of the sponsoring business — that participant must take RMDs from the current plan on the normal schedule.
It is also worth noting how the IRS treats the retirement date itself. A last day of work on December 31 counts as retirement in that calendar year, which means the participant's first RMD is due no later than April 1 of the following year. Working into early January can push the first required withdrawal a full year further out.
The Reverse-Rollover Strategy
For workers who expect to stay employed well past 73, a less-discussed planning move is to consolidate eligible retirement accounts into the current employer's plan rather than out of it. If the 401(k) accepts roll-ins, an employee can move balances from old 401(k)s and even pre-tax IRA dollars into the current plan and shelter the combined balance from RMDs until they actually retire.
The trade-off is that the consolidated funds become subject to the current plan's investment menu and fees. The trade-off in the other direction is just as important: rolling a still-working 401(k) out to an IRA forfeits the exception immediately, because the receiving IRA is subject to RMDs from age 73 forward.
Practical Takeaways
- Working past 73 is not enough on its own. The plan must allow the deferral and the participant cannot be a 5% owner.
- Keep the current 401(k) intact. Rolling it to an IRA ends the deferral the moment the transfer settles.
- Old 401(k)s and IRAs still trigger RMDs. The exception is plan-specific, not person-specific.
- Mind the calendar. Retiring December 31 counts as retiring that year for RMD purposes.
- Confirm the plan document. Ask the plan administrator in writing whether the still-working exception is available before relying on it.
The missed-RMD penalty under SECURE 2.0 is 25% of the shortfall, dropping to 10% if corrected within a two-year window using IRS Form 5329. That makes verifying eligibility — rather than assuming it — the single most valuable step in any still-working RMD strategy.
Sources: IRS Retirement Plan and IRA RMD FAQs, Kitces.com, Charles Schwab, Ed Slott and Company, The Motley Fool