At 74, He Went Back to Work and Thought His RMDs Stopped. The Mistake Could Make More of His Social Security Taxable.
Going back to work at 74 felt like a fresh start, but one assumption about retirement accounts set off a chain reaction that quietly inflated his tax bill and threatened to raise his Medicare premiums years down the road.
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Older Americans are leaving the labor force in large numbers, but retirement is not always final. The Wall Street Journal reported on July 2 that labor-force participation among people 55 and older had fallen to a 21-year low of 37.1%. Even so, some retirees eventually return to work.
Consider a 74-year-old who spent two years drawing down his retirement accounts, then accepted a part-time position with a new employer this spring. He assumed the paycheck flipped a switch that paused every required minimum distribution (RMD) he had been taking. That assumption is mostly wrong, and the mistake can quietly ripple into the taxation of his Social Security and the cost of Medicare.
On retirement forums, people in their seventies regularly ask whether returning to work lets them stop taking money from IRAs and old 401(k)s. The IRS answer is much narrower than the phrase “still-working exception” makes it sound.
What the Still-Working Exception Actually Covers
An employee may be able to delay RMDs from the retirement plan sponsored by the employer for which he currently works. The plan’s written rules must permit the delay. Some require distributions to begin at 73 regardless of employment.
Here is what the exception does not do:
- It does not stop RMDs from traditional, SEP, or SIMPLE IRAs. Those distributions continue regardless of employment.
- It does not stop RMDs from plans maintained by former employers, including old 401(k) accounts.
- It does not apply to someone who owns more than 5% of the business sponsoring the current plan.
The new job therefore does not pause existing distributions automatically. At most, it may protect money held inside the new employer’s plan while he continues working there. For a 74-year-old whose savings remain in a rollover IRA and former employer’s 401(k), most or all of his RMD obligation continues.
Why This Reaches Social Security and Medicare
The distributions he must continue taking generally enter ordinary taxable income. His new wages land on the same return.
That combination can raise provisional income, the federal tax calculation used to determine how much of a Social Security benefit becomes taxable. It generally includes adjusted gross income, tax-exempt interest, and half of Social Security benefits. An RMD he thought had disappeared can help push as much as 85% of his benefit into taxable income.
The same income can affect Medicare. The Income-Related Monthly Adjustment Amount, or IRMAA, raises Part B and Part D premiums for higher-income beneficiaries. Medicare generally uses income from two years earlier, meaning wages and RMDs reported in 2026 can affect premiums in 2028. By the time the premium notice arrives, the job may be over and the retiree may have forgotten which tax return caused the increase.
Can He Move the Money Into the New Plan?
Potentially, but the order matters.
If the current employer’s plan accepts incoming rollovers, he may be able to transfer eligible money from an IRA or former employer’s plan into it. Any RMD already due for the year must generally come out first because an RMD cannot be rolled over. The remaining eligible balance may then qualify for the still-working exception in future years, provided the current plan permits delayed RMDs.
That can be useful, but it requires more than returning to work. He must be eligible for the plan, the plan must accept the rollover, and its distribution rules must allow the delay.
What to Sort Out Before the Next Paycheck
Two questions carry most of the weight:
- Confirm in writing whether the current employer’s plan allows RMDs to be delayed and accepts rollovers from IRAs or former workplace plans.
- Project the year using the wages and RMDs that will remain. Those figures shape both the taxation of Social Security and Medicare premiums approximately two years later.
Returning to work can reopen a paycheck. It does not place every retirement account back behind the RMD starting line.
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Gerelyn Terzo is the author of dividend investing handbook "Dividend Investing Strategies: How to Have Your Cake & Eat It Too." A veteran financial journalist, she covers agri-finance for outlets like Global AgInvesting and the broader stock market and personal finance for 24/7 Wall Street. She began at CNBC and later helped launch Fox Business in New York. Gerelyn currently resides in Woodland Park, Colorado and dabbles in nature photography as a hobby.
