The Still-Working Exception and Roth Conversions in an RMD Year: Today’s Slott Report Mailbag

Thursday, December 05, 2024

By Ian Berger, JD
IRA Analyst

Question:

If you continue to work past age 73, are you exempt from required minimum distributions (RMDs)? My 73 year-old wife is still working and contributing to her company’s 401(k), and she doesn’t own more than 5% of the company. Is she required to take out any RMD? 

Could you please clarify this rule for me? Thank you.

Answer:

Assuming your wife’s plan allows it (most do), she can defer RMDs until her retirement under the “still-working exception.” That exception is not available for anyone who owns more than 5% of the company maintaining the plan. Even though she can defer RMDs from her 401(k), your wife must still take RMDs from any IRA starting this year.

Question:

I have a question about the new rule that requires that all IRA required minimum distributions (RMDs) must be satisfied prior to doing a Roth IRA conversion.

If the only RMD I have to take is from an inherited IRA (I am only 65 years old), then does this rule come into play? I was planning on doing my Roth conversion early in January 2025, but the RMD from my inherited IRA can’t easily be taken until April 2025 (when my CDs mature). Does this rule apply to inherited IRA RMDs?

Thanks,

Brian

Answer:

Hi Brian,

Good question! No, the rule requiring that RMDs from all IRAs must be taken before a Roth conversion (or 60-day rollover) is done only applies to your own IRAs — not IRAs that you have inherited. So, you can do the Roth conversion before you take the RMD from your inherited IRA.

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