At 75 He Still Has a Paycheck and Still Hasn’t Taken a Single RMD From His 401(k). The Exception Is Written Into the Law, and the IRA Down the Street Doesn’t Get It

If you are still drawing a paycheck at 73 or older and your retirement money sits in a workplace 401(k), federal law lets you skip required minimum distributions from that plan until the year you actually retire. The still-working exception is real, written directly into the tax code, and it ranks among the most misunderstood rules in all of retirement planning. Miss even one of its four conditions and the IRS treats you exactly like everyone else.

What the Code Actually Says

The rule lives in Internal Revenue Code §401(a)(9)(C). Your “required beginning date” for a workplace plan is April 1 of the year after the later of two events: the year you turn 73, or the year you retire. For IRAs, only the age trigger counts. SECURE 2.0 set the RMD starting age at 73 for those born between 1951 and 1959, whose first distributions fall in the 2024 through 2032 window. For anyone born in 1960 or later, the trigger jumps to age 75, with first distributions arriving in 2035 at the earliest.

SECURE 2.0 also cut the excise tax on a missed RMD from 50% to 25%, dropping further to 10% if the shortfall is corrected within two years. That is a meaningful safety net for someone who discovers the error quickly, but it is still a steep price for a mistake that was entirely avoidable.

Four Gates, Four Ways to Lose the Shelter

• Gate one: your plan has to adopt the exception. It is permitted, not mandatory. Plenty of plans force distributions at the statutory age regardless of employment status. Read the summary plan description before you assume the shelter exists.
• Gate two: the exception covers only the plan of the employer you currently work for. Any 401(k), 403(b), or 457(b) you left behind at a prior job runs on the normal schedule. A stack of old plans across three former employers means three sets of RMDs due this year, even if you are still punching a clock somewhere new.
• Gate three: the exception does not apply to IRAs. Ever. Traditional, SEP, SIMPLE, or rollover, the account type does not matter. If you turned 73 and hold an IRA, your required beginning date arrived on schedule. Continued employment changes nothing.
• Gate four: you cannot be a “5% owner” of the business sponsoring the plan. IRC §416(i) sets the threshold, and IRC §318 attribution rules can treat you as owning stock held by your spouse, children, grandchildren, and parents. Owners of family businesses routinely trip this wire and never know it until an auditor asks.

The Consolidation Move Most People Miss

Because the shelter only covers your current employer’s plan, moving other retirement money into that plan pulls it under the same umbrella. If your plan accepts incoming rollovers (again, permitted, not required), you can roll pre-tax IRA balances and old 401(k)s in and postpone distributions on the combined balance. The key timing detail: do the consolidation before you hit your RMD age, because once distributions are due from an old account you cannot retroactively fold them into the still-working shelter.

The counterweights are real. Workplace plans usually carry narrower investment menus and higher administrative costs than a self-directed IRA. Assets inside a plan are also less flexible: no qualified charitable distributions, tighter withdrawal rules, and harder to move while you remain employed. Of those limitations, the QCD restriction is the one most workers underestimate. Once you reach 70½, an IRA lets you send up to $108,000 directly to charity each year and keep that amount entirely out of your adjusted gross income. A 401(k) offers no equivalent.

Rolling pre-tax IRA money into a 401(k) also empties your pre-tax IRA balance, which clears the way for a clean backdoor Roth contribution because the pro-rata rule looks only at IRA balances.

Why the Deferral Is Worth More Than It Looks

A worker past the RMD age who is still earning a salary would stack a forced distribution on top of wages at the highest marginal rate of the decade (we walked through how to defuse that first-year tax bill in a free guide here). Beyond the income tax, there is a Medicare tripwire that catches many people off guard. For 2026, income-related monthly adjustment amounts begin once modified adjusted gross income exceeds $109,000 for individuals and $218,000 for joint filers, with a two-year lookback applied to your returns. An unnecessary distribution taken in 2026 lands on your 2026 tax return and raises your Medicare Part B and Part D premiums in 2028. At the top bracket, Part B alone reaches $689.90 per month in 2026, a surcharge that compounds over two full years of elevated premiums before it can be corrected.

The Year You Actually Retire

For this purpose, retirement means a full separation from service. Cutting back to part-time generally does not qualify if you remain on the payroll as an employee. If you are rehired the following year, the clock does not reset. Roth balances inside a 401(k) are no longer subject to lifetime RMDs under SECURE 2.0, effective for tax years beginning in 2024, so the still-working question is simply moot for those dollars. When you do retire, your first distribution from the formerly sheltered plan is due by April 1 of the following year, and the second is due by December 31 of that same year. That compressed calendar is precisely how retirees end up with two taxable withdrawals landing in one calendar year.

Before you count on any of this, ask your plan administrator for two documents: the summary plan description, to confirm both the still-working exception and rollover-in provisions, and a written statement of your ownership percentage calculated under the §318 attribution rules. Everything else follows from those two pages.

Editor’s note: This article was updated to clarify SECURE 2.0’s birth-year-based RMD age tiers (age 73 for those born 1951 to 1959, age 75 for those born 1960 or later with first distributions in 2035), to add the reduced missed-RMD excise tax rates (25%, or 10% with timely correction) introduced by SECURE 2.0, and to note the 2026 QCD annual limit of $108,000 as a key advantage lost when rolling IRA funds into a 401(k).

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