Still-working Exception and RMDs: Today’s Q&A Mailbag | Ed Slott and Company, LLC

Still-working Exception and RMDs: Today’s Q&A Mailbag

By Jim Glass, JD
IRA Analyst
Follow Us on Twitter: @theslottreport

This week's Slott Report Mailbag looks into RMD rules and the "still-working" exception as it pertains to IRAs. As always, we recommend you work with a competent, educated financial advisor to keep your retirement nest egg safe and secure. You can find one in your area here.


Good Morning Mr. Slott and Colleagues,
I just finish reading your book The Retirement Savings Time Bomb... and How to Defuse It. It helped me to narrow down some questionable areas. I am going to be 70 years old in January 2018 and still working full time (enjoying it too). I live in Silicon Valley (San Jose, CA) and would like to get your recommendation for a professional who can advise on what IRA to choose. As of now I have one IRA account from the company I used to work for and presently have a 401(k) and 457 plan from my current employer / State of California.
I truly appreciate your time and grateful to you for a book that has guided me to this question. My birthday is  1/30/2018. When should I take my first RMD?  Do I have to take a RMD from the 401(k) and 457 since I am still employed full time?


Hello Raisa,  
Generally, the rules require you to take an RMD from your retirement account for the year you reach age 70½. However, as you are still employed (and don't own more than 5% of your employer, the State of California) the "still-working" exception in the tax code can exempt you from having to take RMDs from your employer-provided 401(k) and 457 plans. (Nonetheless, the terms of the employer plans may still require you to take the RMDs, so check with the plan administrators.)
The still-working exception does not apply to IRAs, so you will have to take a RMD from your IRA for 2018. The first RMD from an IRA, for the year someone reaches age 70½, can be taken as late as April 1 of the following year. So you can take your IRA RMD for 2018 as late as April 1, 2019.
You have the option of taking this first RMD on any date from now until then. When it will be best for you to take it depends on your specific circumstances. Taking your RMD for 2018 in 2019 will defer that income into 2019 to minimize your 2018 tax liability but will correspondingly increase your 2019 taxable income and resulting liability.  Consider in which year you expect to be in the highest tax bracket. 
If you wish to find a member of Ed Slott's Elite IRA Advisor Group in your area who can help you with this decision, visit


I attended one of your associate’s presentations a few years ago and learned more about how the 401(k) NUA rules work. Is there anything in the current tax reform bill (TCJA a/k/a H.R. 1) that would end the NUA tax break?


Hello Bruce,

No, as of this writing there is nothing in the proposed new tax law that would adversely affect the tax-saving benefits of the NUA rules.


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