Do You Have To Take Out Required Minimum Distributions If You're Working Full-Time? Suze Orman Breaks It Down

If you're still working past age 73 and wondering whether you need to take required minimum distributions, you're not alone. A recent question on the "Women & Money" podcast brought this issue to light — and Suze Orman had plenty to say about it.

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The Listener's Dilemma: Still Working at 76

A listener named Janet wrote in with a common concern: She recently turned 76 and was told that as long as she's working full-time, she doesn't need to start RMDs. She's now considering retirement and wants to know what to do next.

Orman's answer depends on the type of retirement account Janet has.

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The Key Difference: Employer Plans vs. IRAs

According to Orman, the rules vary depending on whether your retirement savings are in an employer-sponsored plan or an Individual Retirement Account.

"If you’re working and the RMDs are from your employer’s plan, your 401K, 403 or [thrift savings plan], you do not have to start taking them at 73," Orman explained. These employer-sponsored accounts are exempt from RMDs until you retire — as long as you’re still employed by the company that sponsors the plan.

But the rule doesn't apply to IRAs.

"However, if you have any IRAs or you only have IRAs or whatever it may be, then that doesn’t apply," Orman said. "So if you have an SEP IRA, a simple IRA, and any of that, you have to take RMDs from the IRAs even if you are working full time."

So if Janet has money in an IRA and hasn't been taking her RMDs, she may already be behind.

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Missed an RMD? Here's What To Do

Missing an RMD doesn't automatically result in a steep penalty, but you'll want to act quickly. Orman suggests taking the missed distribution right away and working with a CPA to file the appropriate forms with the IRS.

"The IRS may waive the penalties entirely if she can show reasonable cause," she said. But timing and documentation matter, so professional help is recommended.

Can You Still Contribute While Taking RMDs?

Another question came up on the podcast: If you're still working and taking RMDs, can you also contribute to a retirement account?

The answer is yes — if you have earned income, you can still contribute to certain accounts. For example, if you're self-employed, you can contribute to a SEP IRA even while taking RMDs. In fact, you may be able to contribute a sizable amount and get a tax deduction.

However, Orman cautioned that just because you can contribute doesn't mean you should. "You might be better off just paying the taxes now and then investing that money in an individual brokerage account," she said, especially if you expect higher tax rates in retirement.

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Bottom Line: Know Your Account Type

The most important thing is to understand what kind of retirement accounts you hold. If your money is in a 401(k) and you're still working for the company that sponsors it, you can likely delay your RMDs. But if your savings are in an IRA, the RMD clock starts ticking at 73 — regardless of your employment status.

When in doubt, it's best to consult with a CPA or financial advisor who can help you navigate the rules and avoid costly mistakes.

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