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401k without RMD. Is this possible?

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  • 401k without RMD. Is this possible?

    Fairly straight forward question. My father turns 70 this year with a good amount in his 401k. He is awful with money and has made all the classic mistakes and trying to prevent another one. He is a private practice physician working under a larger umbrella company. He claims that he has a unique 401k that does not require RMD and that he can choose when to take them.


    IS this possible? Has anyone ever heard of this type of 401k? Google tells me that this is possible as long as you continue to work but ive never heard mention of this option in the "blogosphere".

  • #2

    sure if he keeps working, no RMD. but unlikely ************************ make it forever.

    he might be mistaken and mean a 457? still RMDs unless you keep working.


    • #3
      That unique feature is him continuing to work. You don’t have to take RMDs from a current 401k as long as you are still working. If he has old trad IRAs/401ks then he should roll them into his current 401k to avoid RMDs on those as well. Before doing this, make sure current 401k has good investment options and low fees.


      • #4
        I’m pretty sure he’s referring to the “still working” exception to RMDs on a workers current qualified employer plan only (NOT IRAs and old employer plans). This is not unique to his plan, it’s part of the IRS code. If he truly wants to avoid ANY RMDs, he will need to roll all Traditional IRAs and old employer plans into his current 401(k), assuming they will accept rollovers.


        • #5
          I see. This concept is likely not mentioned often in the blogosphere because everyone wants FIRE. But its good to know that if you keep working you don't need to take RMD if its a 401k(not an IRA).




          • #6
            A few general things to keep in mind with the >= year you turn 70 1/2 "still working" exception:

            1. An RMD is required for the year you stop working. This is still true if you retire on the last business day of the year. Many retirees are surprised when an RMD is due for that year. However, you have until 4/1 of the next year to take the RMD. Yes, you will have two years if RMDs taxable that year, but it should be a lower income year.

            2. The first distribution dollars once RMDs begin are always considered to be RMD dollars. Do not do rollovers until you have taken the RMD for the year.

            3. The still working exception does not apply to 5% owners of a business. While it does not appear to apply to the OP's father. One participant 401k 5% owners must begin taking RMDs the year they turn 70 1/2 regardless if they are still working. However, they can still continue to make contributions.

            P.S. One strategy if the employer has a high or no contribution percentage limit. Is to work just long enough in the new year to maximize 401k contributions.