Most people assume that once you hit RMD age, the IRS marches into your life with a clipboard and says, "Time to start taking money out." And that's true… unless it isn't. Because there's one exception — one very specific carve-out — that catches late-career workers by surprise.
It's called the Still-Working Exception, and it's the only time the IRS looks at someone in their 70s and says, "You know what? Keep the money. We'll wait."
If you've never heard of it, don't worry — most people haven't. And the ones who have heard of it usually misunderstand how narrow it actually is. So let's clear the fog.
What the Exception Actually Covers
The Still-Working Exception applies only to current employer 401(k) or 403(b) plans. Not IRAs. Not old employer plans you left years ago. Not that 401(k) you keep saying you'll consolidate "someday."
Just the plan at the job where you are actively, currently working.
If you are still working for that employer past RMD age, and you do not own more than 5% of the company, the plan is allowed to postpone your RMDs until April 1 of the year after you finally retire. Full breakdown: RMD Mistakes & Fixes (still-working exception pitfalls).
That's it.
That's the whole exception.
Simple on the surface — and wildly misunderstood underneath.
Where People Get Tripped Up
People hear "still working" and immediately assume it applies to all their accounts. Or they hear a friend talk about it and assume it's a universal rule.
But here's the real-world version:
You can delay RMDs only from the plan at your current job.
Your IRAs? No exception. You still owe RMDs from those.
Your old 401(k)s from ten jobs ago? Also no exception. They're treated just like IRAs once you leave the employer.
This is why someone can be working full-time at age 73 and still have to take multiple RMDs — just not from their current plan.
The 5% Ownership Rule Everyone Ignores Until It Hurts
If you own more than 5% of the company — even one grain of rice more — you are not eligible for the Still-Working Exception.
And "ownership" includes some fun family attribution rules that catch people off guard. Sometimes they don't realize they're treated as owning part of the company simply because their spouse or kids do.
If you're over that threshold, you take RMDs like everyone else, no exceptions.
Why This Exception Matters
The Still-Working Exception can be a powerful tax-planning tool for late-career workers. Delaying RMDs means delaying taxable income. And delaying taxable income opens the door for cleaner Roth conversion strategies, fewer Social Security headaches, and possibly lower Medicare premiums.
But — and this is important — that only applies to the current plan. Not the IRAs sitting off to the side aging quietly like fine cheese.
Sometimes the best move for someone still working is to roll old plans into the current plan to take advantage of the exception. Other times, it makes zero sense. Every situation is different, and the IRS did not design this rule for simplicity.
They did, however, design it to surprise people. And it works.
The Bottom Line
The Still-Working Exception is one of the rare moments where the IRS says, "If you're still on the job, we won't force withdrawals yet." But the rule is narrow, specific, and not nearly as flexible as people assume.
If the only takeaway is this: It applies only to the plan at your current employer and only if you don't own more than 5% of the company — you're already ahead of 90% of late-career workers.
And if someone ever says, "I don't owe RMDs because I'm still working," you now have the perfect follow-up question:
"From which account?"
It's amazing how fast clarity shows up.
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Standard Disclaimer
This Knowledge Blast is for educational purposes only. It is not financial, tax, or legal advice. Always consult a qualified professional about your specific situation.