401(k) RMD Rules: Required Minimum Distributions, the Still-Working Exception & How Rollover Decisions Change Your Timeline

Required minimum distributions from a 401(k) start at age 73 — but unlike IRAs, a 401(k) has a still-working exception that lets you defer RMDs indefinitely as long as you're employed and own 5% or less of the company. Whether and when you roll over your 401(k) directly changes your RMD obligations, and getting this sequence wrong can trigger an unnecessary tax bill decades earlier than needed.

When do 401(k) RMDs start?

The SECURE 2.0 Act raised the RMD starting age in two steps:¹

The April 1 first-year deadline creates a trap: if you delay your first RMD to the following April 1, you'll also owe your second RMD by December 31 of the same year — two RMDs in one calendar year, which can push you into a higher bracket and trigger IRMAA surcharges. Most tax planners recommend taking the first RMD in the year you actually turn 73 (or 75) rather than deferring to April.

The still-working exception: how to defer 401(k) RMDs past 73

This is where 401(k)s differ fundamentally from IRAs. Under IRC § 401(a)(9)(C), participants in an employer-sponsored plan can delay RMDs from that specific plan until April 1 of the year following the year they retire — even if they are already past age 73.²

Requirements to qualify for the still-working exception:

• You must be actively employed by the employer sponsoring the plan. Contractor, board member, or part-time status may not qualify — the IRS test is whether you're a bona fide employee under the plan's definition.
• You must own 5% or less of the company sponsoring the plan. If you own more than 5%, RMDs begin at the normal age regardless of employment status.²
• The exception applies only to the current employer's plan. Old 401(k)s from prior employers, IRAs, and other account types owe RMDs on their own schedules.

How your rollover decision changes your RMD timeline

The direction and destination of a rollover can add or remove years of tax-deferred growth:

Roth 401(k): no lifetime RMDs

Starting in 2024, SECURE 2.0 § 325 eliminated lifetime required minimum distributions from designated Roth accounts in employer plans — Roth 401(k)s, Roth 403(b)s, and Roth TSPs.³ Previously, Roth 401(k) owners had to either take RMDs or roll to a Roth IRA (which has no lifetime RMDs) to avoid distributions. That step is no longer required.

What this means for rollover decisions: If you have a Roth 401(k) and your primary goal is avoiding lifetime RMDs, there's no longer a RMD-driven reason to roll to a Roth IRA. Other reasons still apply — investment choice, creditor protection considerations, Roth IRA five-year clock management — but RMD avoidance is no longer one of them.

Year-of-death RMD: the trap before a rollover

If a 401(k) owner dies in a year when they were required to take an RMD, the RMD for that year must be distributed before any rollover can occur. You cannot roll an RMD into an IRA — it is not eligible for rollover treatment under IRC § 408(d)(3)(E).⁴

This matters most for inherited 401(k) situations: if you inherit a 401(k) from someone who died after their RBD (Required Beginning Date), the administrator should segregate and distribute the year-of-death RMD before transferring the remaining balance to an inherited IRA. If the full balance is transferred and the RMD is accidentally included, the RMD portion of the transfer is treated as an excess contribution — creating a 6% annual penalty until corrected. See our inherited 401(k) rollover guide for the full sequence.

How to calculate your 401(k) RMD

The RMD formula is simple: divide your account balance as of December 31 of the prior year by the IRS life expectancy factor from the Uniform Lifetime Table.⁵

Formula: RMD = Prior December 31 balance ÷ Uniform Lifetime Table factor for your age

The IRS updated the Uniform Lifetime Table in 2022 (T.D. 9930) to reflect longer life expectancy — divisors are larger than the pre-2022 table, which means smaller required distributions for the same balance.⁵

Exception: if your sole beneficiary is a spouse more than 10 years younger, you may use the Joint Life and Last Survivor Table instead, which produces an even smaller RMD. This only applies if the spouse is the sole designated beneficiary for the entire year.

401(k) RMD estimator

Enter your December 31 balance and your age to see your estimated RMD for the current year.

Uses the IRS Uniform Lifetime Table (T.D. 9930, effective 2022). Assumes the account is a traditional (pre-tax) 401(k) and the sole beneficiary is not a spouse more than 10 years younger. Consult a tax advisor for inherited accounts and joint-life calculations.

401(k) RMD aggregation rules: one account at a time

This is an important difference between 401(k)s and IRAs. For IRAs, you can aggregate all traditional IRAs together and satisfy the combined RMD from any single IRA (or any combination). For 401(k)s, you cannot aggregate — each plan must satisfy its own RMD independently.⁶

If you have three old 401(k)s (from three former employers), each owes its own RMD. You cannot take the full combined amount from just one plan. This is a practical argument for consolidating old 401(k)s — either into an IRA (which allows aggregation) or into a current employer plan (which puts all balances under a single still-working deferral).

Three real scenarios

Scenario 1: Hospital CFO, age 73, still working — defers $2.1M in RMDs

She owns 2% of a hospital network and turns 73 in 2026. Her current employer 401(k) holds $1.4M. She also has an old 401(k) from a prior hospital employer worth $700K sitting in a separate plan.

If she does nothing: the $1.4M current-plan balance is exempt under the still-working exception. The $700K old-employer 401(k) owes an RMD of approximately $26,415 ($700,000 ÷ 26.5, the age-73 Uniform Lifetime Table factor). She also has a traditional IRA from an early career job worth $200K, which owes about $7,547 ($200,000 ÷ 26.5).

Better strategy: she initiates a reverse rollover, moving the $700K old 401(k) into her current employer's plan (if accepted). Now the combined $2.1M falls under the still-working exception — zero RMDs until she retires. The $200K IRA still owes its own RMD since IRAs don't benefit from the still-working exception. If she wants to eliminate the IRA RMD too, she can do a reverse rollover of the IRA into her 401(k) as well — completely legal and eliminates that $8K/year RMD while she remains employed.

Scenario 2: Business consultant, age 71, in-service rollover trade-off

He's 71, owns exactly 4% of a consulting firm, and has $600K in his employer 401(k). The 401(k) has mediocre fund choices with expense ratios averaging 0.65%. He's considering an in-service rollover at age 71 to move his balance to a Vanguard IRA with 0.03% expense ratios.

The RMD math on the in-service rollover: he saves roughly $3,720/year in fees on the $600K balance (0.62% difference). But he's giving up the still-working exception — once rolled to an IRA, RMDs begin at age 73, roughly two years away. At age 73, the RMD on a $700K IRA (assuming 7% growth to ~$690K rounded to $700K) would be about $26,415/year in forced taxable income ($700,000 ÷ 26.5). He's in the 32% bracket. That's roughly $8,453 in annual extra tax that didn't exist before.

In this case, the fee savings ($3,720/year) are real but smaller than the RMD tax cost ($9,069/year at the margin). For him, the better move is a reverse rollover of any IRA assets into the 401(k) — not rolling the 401(k) out. He should revisit the question at or near actual retirement when the still-working exception is expiring anyway.

Scenario 3: Physician, age 75, retired last year — IRA aggregation simplification

She retired at 74 and has four accounts: $1.2M traditional IRA (from old 401(k) rollover), $400K old hospital 401(k), $300K old clinic 401(k), and $180K solo 401(k) from a side practice she closed in 2022. Four separate RMDs, four separate plan administrators to coordinate.

At age 75, the Uniform Lifetime Table factor is 24.6. Her RMDs:
Traditional IRA: $1,200,000 ÷ 24.6 = $48,780
Old hospital 401(k): $400,000 ÷ 24.6 = $16,260
Old clinic 401(k): $300,000 ÷ 24.6 = $12,195
Solo 401(k): $180,000 ÷ 24.6 = $7,317
Total: $84,552 in mandatory distributions

She rolls all three 401(k)s into her existing traditional IRA. Going forward, she has one account with one RMD — and she can take it from any IRA she chooses (she has two: this one plus a small spousal rollover IRA). Simplification was the primary win here; the RMD amounts don't change materially, but managing one account is far easier and reduces the chance of missing an RMD deadline on a smaller forgotten plan.

What happens if you miss an RMD?

Before SECURE 2.0, the penalty for missing an RMD was 50% of the amount you failed to take — one of the harshest penalties in the tax code. SECURE 2.0 reduced this to 25%, further reduced to 10% if you correct the missed RMD within the "correction window" (generally by the second year following the missed RMD, or by the date the IRS sends a deficiency notice).¹

You report missed RMDs and pay the excise tax on IRS Form 5329. If you have a reasonable cause (serious illness, reliance on incorrect plan administrator advice), you can request a waiver — the IRS has historically been lenient on first-time mistakes with prompt correction.

Sources

1. IRS — Retirement Topics: Required Minimum Distributions (RMDs). SECURE 2.0 Act § 107: RMD age 73 for individuals born 1951–1959; age 75 for those born 1960 or later. SECURE 2.0 § 302: RMD excise tax reduced from 50% to 25% (10% if corrected timely). Final regulations under IRC § 401(a)(9) effective for distribution calendar years beginning on or after January 1, 2025. Verified May 2026.
2. IRS — Retirement Plan and IRA RMD FAQs. IRC § 401(a)(9)(C): participants in qualified employer plans may defer RMDs beyond the normal starting age if still employed and they do not own more than 5% of the employer. The exception applies to the current employer's plan only; old 401(k) plans, IRAs, and other accounts owe RMDs on their own schedules. Verified May 2026.
3. IRS — Retirement Topics: Roth Distributions. SECURE 2.0 Act § 325: effective for taxable years beginning after December 31, 2023, designated Roth accounts in employer-sponsored plans (Roth 401(k), Roth 403(b), Roth TSP) are no longer subject to lifetime RMDs. Verified May 2026.
4. IRS — Rollovers of Retirement Plan and IRA Distributions. IRC § 408(d)(3)(E): amounts that are required minimum distributions are not eligible for rollover. For a participant who dies after the RBD, the year-of-death RMD must be distributed to the beneficiary (not rolled over) before the remaining balance can be transferred to an inherited IRA. T.D. 10001 (July 2024) final regulations confirmed this treatment. Verified May 2026.
5. IRS Publication 590-B — Distributions from Individual Retirement Arrangements. IRS T.D. 9930 (effective for distribution calendar years beginning January 1, 2022): updated Uniform Lifetime Table and Single Life Expectancy Table. Divisors are larger than the prior table, reflecting longer life expectancy. The Uniform Lifetime Table applies to all account owners unless the sole beneficiary is a spouse more than 10 years younger (Joint Life Table applies in that case). Verified May 2026.
6. IRS — RMDs: Aggregation Rules. For IRAs, RMDs from multiple traditional IRAs may be aggregated and satisfied from any single IRA. For 401(k) and other qualified plans, there is no aggregation: each plan must independently satisfy its own RMD. This is a practical reason to consolidate multiple old 401(k)s into either an IRA or a current employer plan. Verified May 2026.

RMD ages reflect SECURE 2.0 Act changes (SECURE 2.0 § 107), effective for individuals turning 73 on or after January 1, 2023. Roth 401(k) RMD elimination (SECURE 2.0 § 325) effective January 1, 2024. Uniform Lifetime Table divisors from IRS T.D. 9930, effective distribution calendar years beginning January 1, 2022. Penalty reduction from 50% to 25%/10% via SECURE 2.0 § 302. Values verified May 2026.