Can You Avoid Required Minimum Distributions (RMDs) If You're Still Working? A Little-Known Retirement Strategy
Meta Description: If you're still working past RMD age, you may be able to postpone Required Minimum Distributions. Learn how the "still working" exception works and what TIAA participants need to know.
Can You Avoid Required Minimum Distributions (RMDs) If You're Still Working?
Many people assume that once they reach Required Minimum Distribution (RMD) age, they have no choice but to begin withdrawing money from all of their retirement accounts.
Fortunately, that's not always true.
If you're still employed, you may qualify for a little-known IRS exception that allows you to delay RMDs from your current employer's retirement plan. For many higher education employees participating in TIAA, this strategy can postpone taxable withdrawals for several years.
Here's how it works.
What Is the "Still Working" Exception?
Normally, once you reach the IRS's Required Minimum Distribution age, you're required to begin taking annual withdrawals from most tax-deferred retirement accounts.
However, there's an important exception.
If you're still working for the employer sponsoring your retirement plan, you may be able to postpone RMDs from that employer's plan until you actually retire.
This exception can be especially valuable if:
You're still receiving a paycheck.
You don't need additional retirement income.
You'd like to reduce your taxable income.
You're trying to avoid increasing Medicare IRMAA premiums or other tax-related costs.
Not every employer plan offers this option, so it's important to verify the rules with your retirement plan administrator.
A Strategy Many People Overlook
Here's a planning strategy that many employees never hear about.
Suppose you've accumulated a Traditional IRA over the years, but you're still employed and participating in your current employer's retirement plan.
Instead of continuing to take Required Minimum Distributions from your IRA, you may be able to:
Roll your IRA into your current employer's retirement plan (if the plan accepts incoming rollovers).
Continue working.
Delay RMDs on those assets until retirement.
For TIAA participants, this often means contacting TIAA to determine whether your employer's plan accepts IRA rollovers and whether the still-working exception applies.
If your plan allows it, this strategy may postpone Required Minimum Distributions for as long as you remain employed.
What Happens When You Eventually Retire?
Eventually, you'll retire and move those assets out of your employer's retirement plan.
Here's an important detail many people don't realize.
Before those assets are rolled into an IRA, your retirement plan administrator will generally process any Required Minimum Distribution that is due for that year first.
In other words:
Your annual RMD is distributed.
The remaining balance can then be transferred to your IRA.
Many retirees are surprised by this process, but it's simply how retirement plan administrators comply with IRS regulations.
Previous Employer Plans Are Different
This is one of the biggest areas of confusion.
Let's say you've worked for three different universities during your career.
You might have:
A current employer 403(b)
Two older 403(b) plans from previous employers
Here's the key distinction:
The still-working exception generally applies only to your current employer's retirement plan.
Your retirement accounts from previous employers usually do not qualify simply because you're still employed somewhere else.
That means you may still be required to take Required Minimum Distributions from those older retirement plans, even while actively working.
This is an important rule that many employees misunderstand.
Could You Consolidate Those Older Accounts?
In some situations, yes.
If your current employer's retirement plan accepts incoming rollovers, you may be able to move eligible retirement assets from previous employer plans into your current employer's plan.
If completed correctly, those assets may then qualify for the still-working exception while you remain employed.
However, eligibility varies by employer and retirement plan.
Before making any transfers, verify that your employer's plan:
Accepts incoming rollovers.
Allows previous employer assets to be consolidated.
Qualifies for the still-working exception under its plan provisions.
Who Should Consider This Strategy?
This planning opportunity may be worth exploring if you:
Are still working past RMD age.
Don't need additional retirement income yet.
Have Traditional IRAs.
Have retirement accounts from previous employers.
Want to reduce current taxable income.
Every employer retirement plan is different, so it's important to confirm the rules before taking action.
Frequently Asked Questions
Can I avoid RMDs if I'm still working?
Possibly. If you're still employed and participating in your current employer's retirement plan, you may qualify for the IRS's still-working exception.
Does this rule apply to my IRA?
Not automatically. However, if your employer's retirement plan accepts IRA rollovers, moving your IRA into that plan may allow those assets to qualify for the still-working exception.
What about retirement plans from previous employers?
Generally, previous employer retirement plans remain subject to Required Minimum Distribution rules, even if you're still working elsewhere.
Will I have to take an RMD when I retire?
Yes. Before your retirement plan transfers assets to an IRA, the required RMD for that year is generally distributed first.
Final Thoughts
The still-working exception can be one of the most valuable—and least understood—retirement planning opportunities available to employees who continue working past RMD age.
For many TIAA participants, it may provide an opportunity to postpone taxable distributions, simplify retirement planning, and maintain greater control over when retirement income begins.
However, every employer plan has its own rules regarding incoming rollovers and RMD eligibility. Before making any decisions, confirm the details with your retirement plan provider and ensure the strategy fits your overall retirement goals.
About Greg Shepard
I'm Greg Shepard, founder of S&A Financial Services and creator of TIAA Simplified. I specialize in helping higher education employees and retirees across the country understand the unique rules surrounding TIAA retirement plans and make informed retirement decisions.
If you're still working past RMD age and want to know whether this strategy applies to your situation, I'd be happy to help you evaluate your options.