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What about RMDs if you’re still working at 71?

I was retired from my job in June this year, but I’ll receive a paycheck and health benefits until next April. I’m 71 years old. I know I should have started taking required minimum distributions, or RMDs, from my 401(k) after I turned 70 12, but I was still working at that time. I was told I couldn’t take them until I retired and was no longer contributing to the plan. Now I’m told not to take RMDs because I’m still considered active in the company while I’m collecting a paycheck. I’m very confused about this. I’m concerned because I know there’s a severe penalty if you don’t take RMDs.

Not to worry. The usual deadline for taking your first RMD is April 1 of the year after you turn 70 1⁄2. But if you’re still working, you don’t have to take them from your current employer’s plan until April 1 of the year after you retire unless you own 5 percent or more of the company you work for.

Since you’re considered actively employed until next April, the year you retire will officially be 2018. That means your deadline for taking your first RMD (which will be based on your 401(k) balance on Dec. 31, 2017) is April 1, 2019.

Your deadline for taking the second RMD (which will be based on your account balance at the end of 2018) is Dec. 31, 2019.

But this means that if you postpone taking the first RMD until April 1, 2019, you’ll wind up having to take two RMDs in 2019. To avoid being taxed on two RMDs in the same year, take the first one in 2018.

THE BOTTOM LINE Many people who work after age 70 1⁄2 have an extended deadline for taking RMDs from their current employer’s retirement plan.


TO ASK THE EXPERT Send questions to Ask the Expert/Act 2, Newsday Newsroom, 235 Pinelawn Rd., Melville, NY 11747; or email Include your name, address and phone numbers. Advice is offered as general guidance. Check with your professional consultants for your specific needs.


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