IRS lets workers aged 73+ delay RMDs from a current employer’s 401(k) but not from rolled‑over IRAs
Executive summary: The IRS clarified that individuals aged 73 or older who are still working can delay required minimum distributions (RMDs) from their current employer’s 401(k) plan, while IRAs holding rolled‑over funds remain subject to RMD rules. This affects retirement tax planning for older workers, influencing the choice between keeping assets in a 401(k) versus rolling them into an IRA and impacting current taxable income and potential penalties.
Who is involved: IRS, workers aged 73+, employers offering 401(k) plans, financial advisors, IRA providers.
Likely next: Continued IRS guidance and potential legislative updates as more employees extend their careers, with advisors likely to recommend strategies that favor employer plans for RMD deferral.
The Internal Revenue Service has clarified that employees who continue working past age 73 may postpone required minimum distributions from the 401(k) plan of their current employer, while any individual retirement account that holds rollover assets from prior jobs remains subject to the standard RMD schedule. This distinction creates a clear incentive for older workers who are still employed to keep at least a portion of their retirement savings in the employer‑sponsored plan rather than moving those funds into an IRA, at least until they retire or change jobs. For plan sponsors, the rule may lead to higher average balances and longer asset‑retention periods in 401(k) accounts, potentially affecting fee structures and investment offerings designed for long‑term holdings. IRA custodians, conversely, might see slower inflows from this age cohort as rollovers are delayed, which could influence their marketing and product strategies. In the near term, we can expect financial advisors to incorporate this rule into retirement‑income planning discussions, helping clients weigh the tax‑deferral benefits of leaving money in a current 401(k) versus the flexibility of an IRA, without altering the underlying RMD requirements for inherited or previously rolled‑over IRA assets.
What's next — scenarios
Targeted 401(k) Consolidation (60%)
Older high-net-worth employees will increasingly roll past IRAs into current employer 401(k) plans to defer RMDs, increasing administrative rollover requests for plan providers over the next 90 days.
- Spike in incoming rollover requests to current employer 401(k) plans from employees aged 73+
- Advisory firms updating their year-end tax planning guides to recommend reverse rollovers
IRA Asset Outflow and Retainage Shift (25%)
Wealth management firms managing traditional IRAs for clients aged 73+ will experience accelerated asset outflows as clients seek to centralize funds in active employer plans for tax deferral.
- Quarterly financial disclosures from major custodians showing higher-than-average IRA distributions or outbound trustee-to-trustee transfers among septuagenarians
- Financial advisors launching targeted campaigns to retain retiring and working clients aged 73+
Regulatory Clarification or Legislative Fix (15%)
Pushback from retirement advocates prompts the IRS or Congress to issue clarifying guidance or emergency relief equalizing the RMD postponement rules for rolled-over IRAs, neutralizing the employer-plan advantage.
- Introduction of bipartisan congressional inquiry or corrective legislation regarding the IRA-to-401(k) disparity
- IRS formal issuance of supplementary guidance or FAQs addressing disparate RMD treatment
What to watch
- Volume of reverse rollover inquiries reported by major 401(k) recordkeepers over the next 60 days
- Advisory notes and client alerts published by major tax preparation firms (e.g., Deloitte, EY, PwC) before year-end
- IRS technical amendments or additional Q&A releases on Secure 2.0 implementation rules within the next 90 days
Timeline
- — Still Working at 73? The IRS Lets You Skip RMDs on Your Current Employer’s 401(k) but Not on the IRA You Rolled Your Last One Into (Yahoo Finance)
Key entities
Sources
- Still Working at 73? The IRS Lets You Skip RMDs on Your Current Employer’s 401(k) but Not on the IRA You Rolled Your Last One Into — Yahoo Finance
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