After you turn 70½ the IRS specifies that you must begin taking Minimum Required Distributions (MRD) from your traditional IRAs. But what if you are still working or have other types of retirement accounts? Will you have to start removing money and paying more taxes?
Anyone who is over the age of 70½ is required to initiate the liquidation of their IRA, SEP-IRA, and Simple-IRA, regardless of employment status. Roth IRAs, on the other hand, are exempt from this rule and do not have any distribution requirement. The regulations on qualified retirement plans, though, are somewhat more involved.
Qualified plans are those offered through an employer. These can include 401(k)s, 403(b)s, profit sharing, and Keogh plans. If you are an employedparticipant in such a plan and over the age of 70½, you can delay the MRD until April 1 of the calendar year after you retire. That is as long as you do not own 5% or more of the business. And there could possibly be more good news for employed seniors who also own IRAs.
The government allows rollovers from IRAs to most employer-sponsored qualified plans. This means that if you are required to take MRD from your IRA and still work, you might be able to roll your account into your employer’s plan. Then you could temporarily avoid taking distributions and paying the associated income tax.
Even though qualified plans are allowed to accept money from IRA rollovers, they are not required to. Therefore, you should check with your employer’s benefit department before you undertake this tax-savings strategy. Still have questions on IRA rollovers? Write down them down on the enclosed card and drop it in the mail.
