401(k) withdrawals can be postponed, but not those from IRAs

Dear Liz: I just turned 70. Must I draw now from my IRA? I still work full time. I heard from one investment company representative that since I work, there is an exemption that I may not have to start withdrawals. Is this true?

Answer: Withdrawals from retirement plans typically must begin after age 70-1/2. You can postpone withdrawals from your company’s 401(k) plan past the typical required minimum distribution age if you’re still working, but not from traditional IRAs.

“An IRA owner must commence distributions from an IRA by April 1 of the calendar year following the year in which the IRA owner turns 70-1/2,” said Mark Luscombe, principal analyst for tax research firm CCH Tax & Accounting North America, “regardless of whether they are still working or not.”

With 401(k) plans, required withdrawals can be delayed to April 1 of the year following the year you retire, unless you’re a 5% or more owner of the business, Luscombe said.

It’s important to get this right, since failing to make required minimum distributions triggers a tax penalty of 50% on the amount not withdrawn that should have been. The required minimum distribution rules apply to all employer-sponsored retirement plans, including profit-sharing plans, 401(k) plans, 403(b) plans and 457(b) plans, the IRS says, as well as to traditional IRAs and IRA-based plans such as SEPs, SARSEPs and SIMPLE IRAs. Required minimum distribution rules also apply to Roth 401(k) accounts, but not to Roth IRAs while the owner is alive.


  1. I was 70.5 years old in 2013, and if I postpone the “minimum draw” from my deferred IRA until April 1st 2014, will the required minimum be based on 2012 December 31st values or 2013 December 31st values?

    • Liz Weston says

      Hi, James. I’m not a tax pro and recommend any tax questions be discussed with one, or you can call the IRS. The IRS seems to indicate you use the Dec. 31 balance of the year prior to your distribution, which would be 2013. Either way, you would have two RMDs in 2014, which could have a dramatic effect on your taxes…all the more reason to discuss your strategy with a tax pro before you pull the trigger.