Q: I've reached the age where I must take required minimum distributions (RMDs) from my IRAs, and I'm doing that this year. I'm still working part-time, and I have funds in my employer's 401(k) plan. It's my understanding that I don't have to withdraw these funds until I quit working, when I'll roll them into my existing traditional IRA.
Am I breaking the rules by continuing to contribute to the 401(k)? What about not taking an RMD from this account?
I haven't received anything from the plan stating that I'm required to take one, as I have from my IRAs. I just don't want to end up with a big tax bill at year-end or at tax time next April! --PD via email
A: Not to worry. You're not breaking any rules.
You must start taking annual RMDs from your retirement accounts no later than April 1 of the year after you turn 70 1/2. That includes your IRAs and any 401(k) accounts you still have in the plans of former employers -- but there's an exception for the 401(k) plan of your current employer.
Even after 70 1/2, you're not required to take any distributions from the 401(k) plan sponsored by a company you still work for unless you own 5% or more of the company.
And there's no age limit for making contributions to your current employer's 401(k) plan.
Please send your questions to [email protected]. I'm sorry I can't respond personally to every email. Questions are only addressed online.
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