Understanding RMDs and Your Retirement Accounts

If you’re still working in your golden years, you might be relieved to know that you don’t have to take Required Minimum Distributions (RMDs) from your employer-sponsored retirement plan. However, the rules differ when it comes to your Individual Retirement Account (IRA). Let’s break down these rules and explore some good advice on managing your retirement funds.

RMDs and Employer-Sponsored Plans

If you are still actively employed and participate in your employer’s retirement plan, you are typically not required to take RMDs from that plan. This means that your money can continue to grow tax-deferred while you are still working. However, this exemption only applies to the plan at your current employer. If you have other retirement accounts, such as an IRA, RMDs will still apply.

RMDs and Your IRA

Unlike employer-sponsored plans, IRAs do not offer the same flexibility regarding RMDs. If you have an IRA, you are required to start taking distributions at age 73, regardless of whether you are still working. This can be a significant consideration when planning your retirement strategy, as it could impact your overall financial health.

A Smart Strategy: Rolling Your IRA into Your Employer-Sponsored Plan

Given these differences, a good piece of advice is to consider rolling your IRA into your employer-sponsored retirement plan, especially if you are still working. Here are a few reasons why this might be a beneficial move:

1. Avoid RMDs: By rolling your IRA into your employer’s plan, you can avoid RMDs for as long as you remain employed. This allows your investments to grow without the pressure of mandatory withdrawals.

2. Consolidation: Managing multiple retirement accounts can be overwhelming. Rolling your IRA into your employer-sponsored plan consolidates your accounts, making it easier to track your investments and manage your retirement savings.

3. Potential for Higher Contribution Limits: Depending on your employer’s plan, you might have access to higher contribution limits or different investment options that could be more beneficial than your IRA.

4. Protection from Creditors: Funds in a qualified retirement plan may have better protection from creditors compared to those in an IRA, depending on state laws.

Considerations Before Rolling Over

While rolling over your IRA can have its benefits, it’s essential to consider the following:

• Plan Restrictions: Not all employer-sponsored plans accept rollovers from IRAs. Check with your HR department or plan administrator.

• Investment Options: Ensure that the investment options available in your employer’s plan align with your retirement goals.

• Fees and Expenses: Review the fees associated with your employer’s plan, as they could impact your overall returns.

In summary, if you are still working, you can benefit from not having to take RMDs from your employer-sponsored retirement plan, while you will still need to take them from your IRA. A smart approach to managing these accounts could be rolling your IRA into your employer’s plan to avoid unnecessary withdrawals and simplify your retirement strategy. Always consider your financial situation and consult with a financial advisor to make the best decisions for your retirement future.

Lets connect for a free consultation.

Alan B Faerber CFP® CRPC®