Required Minimum Distributions: Navigating the Maze

Tax-deferred accounts like traditional IRAs and 401(k)s are a deal with the IRS: you deduct contributions today in exchange for a mandatory, taxed payout tomorrow. These forced payouts are Required Minimum Distributions (RMDs).

Under SECURE 2.0 (Division T of P.L. 117–328), the “applicable age” of IRC §401(a)(9)(C)(v), “Required distributions” is currently fixed at 73, and rises to 75 in 2033 for those born in 1960 or later. That is the reading everyone administers, but note that the statute as drafted keys the age-75 rule to attaining age 74 after 2032, which on its face also captures 1959 births and leaves them arguably subject to both 73 and 75. Congress has not corrected the glitch. If you were born in 1959, plan on 73 and watch for a technical correction instead of betting on the later date.

The only common way to delay an RMD from a workplace plan is the still-working exception of IRC §401(a)(9)(C)(i)(II): if you are actively employed by the company sponsoring the 401(k) and do not own more than 5% of the business, that plan’s RMD is deferred until you separate. It does not extend to IRAs, and it does not extend to plans left behind at former employers — which is an argument for rolling old plans into the current employer’s 401(k) instead of an IRA if you intend to keep working.