35% Are Retiring Later, and Only One Account Gets a Pass
A worker turning 73 while still on the job can postpone withdrawals from his current employer's 401(k) — but his IRA keeps its own clock, and the payout feeds straight into the Social Security tax math.
With 35% of workers now pushing their retirement date later, a worker who reaches the age 73 required-minimum-distribution threshold while still employed may be able to delay withdrawals from his current employer's 401(k), but not from his IRA, and the forced IRA withdrawal can raise the share of his Social Security benefit that is taxed.
More Americans are moving the finish line. Roughly 35% of workers say they have pushed their retirement date later than originally planned, and that single behavioral shift collides with a tax rule most savers only meet once: the required minimum distribution, or RMD, the withdrawal the IRS forces out of tax-deferred retirement accounts starting at age 73.
The collision produces an outcome that surprises people every year. A 73-year-old who is still working may be allowed to leave the money in his current employer's 401(k) untouched. The IRA he has held for decades — possibly at the very same brokerage, on the same statement, with the same login — gets no such reprieve. One account is exempt while he works. The other starts paying out whether he needs the cash or not.
What the still-working exception actually covers
The exception is narrow and literal. It applies to the plan sponsored by the employer he is currently working for. If he is still on the payroll past the year he turns 73 and the plan document permits the delay, the first distribution from that plan can wait until he separates from service.
Everything else keeps its own clock:
- Traditional IRAs — no employment-based delay exists. Age 73 is age 73, working or not.
- Old 401(k)s from former employers — the exception follows the current job, not the account type. A plan left behind at a prior employer is not covered.
- SEP and SIMPLE IRAs — these are IRAs for distribution purposes, regardless of how the contributions got there.
Two further conditions matter. The plan has to actually offer the delay; it is permitted, not mandated, and the plan document controls. And the exception is off the table for someone who owns a substantial stake in the sponsoring business — the rule exists to protect employees who happen to still be working, not owners who can schedule their own retirement date around the tax calendar.
Why the IRA distribution reaches into Social Security
Here is the part that gets missed. An RMD is not a standalone event. It lands in adjusted gross income, and the calculation that determines how much of a Social Security benefit is taxable is driven by a measure of income that includes those distributions plus tax-exempt interest plus half the benefit itself.
So a still-working 73-year-old is potentially stacking three income streams in the same tax year: wages from the job he has not left, Social Security if he has already claimed it, and a mandatory IRA withdrawal he did not ask for. Each dollar of forced IRA distribution can drag additional Social Security dollars into taxable income behind it, which is why the effective marginal rate on that withdrawal can be meaningfully higher than the bracket suggests. The withdrawal is taxed, and it makes a previously untaxed portion of the benefit taxable too.
That is the quiet mechanism the 24/7 Wall St case highlights: two accounts, one exempt and one not, producing a tax result that has nothing to do with how the money was invested.
The reverse rollover, and when it helps
There is a planning move available to people in exactly this position, and it runs opposite to the direction money usually travels. Instead of rolling the 401(k) into an IRA — the standard post-retirement step — a still-working saver can roll the IRA into the active 401(k), if the plan accepts incoming rollovers. Once the balance sits inside the current employer's plan, it falls under the still-working exception along with the rest of that plan, and the RMD is deferred until separation.
There is a planning move available to people in exactly this position, and it runs opposite to the direction money usually travels.
Constraints to check before anyone tries it:
- The plan must accept roll-ins. Many do; not all do.
- The transfer must happen before the year the RMD is due. A distribution that is already required cannot be rolled over to escape itself.
- Only pre-tax IRA money moves cleanly. After-tax basis in an IRA complicates the transaction.
- 401(k) investment menus are narrower than an IRA's open architecture, and fee structures differ. Deferring tax is not automatically worth accepting a worse lineup.
There is also the opposite case. Someone in an unusually low-income year — retired from the wage side, not yet claiming Social Security — may want distributions to happen, not be deferred. Postponing RMDs into a future year when wages, benefits and a larger account balance all arrive together can produce a bigger bill than taking the money early and voluntarily. Deferral is a tool, not a default.
Market levels set the size of the bill
The RMD amount is a function of the prior year-end account balance divided by a life-expectancy factor, which means the size of the forced withdrawal is set by where markets closed, not by what the retiree needs to spend. A strong year lifts the following year's mandatory distribution and, with it, the Social Security tax exposure.
Benchmarks finished the week close to flat and mixed. As of the last trade on Friday, 18 September 2026 at 20:00 GMT, the SPDR S&P 500 ETF (NYSEARCA: SPY) closed at $761.69, down 0.12% from the prior close of $762.60, after a day range of $757.97 to $762.00. The Invesco QQQ Trust (NASDAQ: QQQ) closed at $721.45, up 0.63%, and the SPDR Dow Jones Industrial Average ETF (NYSEARCA: DIA) closed at $515.88, down 0.48%. For anyone approaching 73, the relevant number is not the daily move but the 31 December mark, because that is the balance the following year's distribution is calculated from.
What to do before year-end
The action items are administrative and time-sensitive. Pull the summary plan description and confirm in writing whether the current employer's plan allows the still-working delay and whether it accepts incoming rollovers. Inventory every tax-deferred account, separating current-employer plans from IRAs and orphaned 401(k)s at past jobs — an old plan from a previous employer can often be consolidated into the active one, which sweeps it under the same exception.
Then run the Social Security taxation math with and without the IRA distribution in the picture. The answer determines whether the reverse rollover is worth the paperwork or whether the forced withdrawal, taken in a year when it is cheap, is the better outcome. With 35% of workers already delaying retirement, this is no longer an edge case — it is the base case for a growing share of people turning 73 with a paycheck still coming in.
Key facts
- Workers delaying retirement: 35%
- RMD start age referenced: 73
- Account that can defer: Current employer's 401(k), if the plan allows
- S&P 500 ETF (SPY) last close: $761.69, -0.12%, as of 18 Sep 2026 20:00 GMT
Frequently asked questions
What is a required minimum distribution?
A required minimum distribution, or RMD, is the amount the IRS forces you to withdraw each year from tax-deferred retirement accounts once you reach the applicable age, which in this case is 73. The withdrawal is taxable as ordinary income. The amount is calculated from the prior year-end account balance divided by a life-expectancy factor.
Can I really skip RMDs from my 401(k) if I am still working?
Possibly. The still-working exception applies only to the plan sponsored by the employer you currently work for, and only if that plan's document permits the delay. It does not apply if you hold a substantial ownership stake in the sponsoring business. Check your summary plan description before assuming the exception is available to you.
Why does my IRA not get the same treatment?
Because the exception is tied to active employment with the plan sponsor, and an IRA has no employer. Traditional IRAs, SEP IRAs and SIMPLE IRAs all begin required distributions at the applicable age regardless of whether you are working. Old 401(k)s from previous employers are also excluded, since the exception follows your current job.
How does an RMD increase the tax on Social Security?
The share of a Social Security benefit that is taxable is determined by a measure of income that includes retirement account distributions, tax-exempt interest and half the benefit. A forced IRA withdrawal raises that measure, which can pull previously untaxed benefit dollars into taxable income, making the effective cost of the withdrawal higher than your bracket alone implies.
What is a reverse rollover and when would I use it?
A reverse rollover moves IRA money into your current employer's 401(k), the opposite of the usual direction. If the plan accepts roll-ins and offers the still-working exception, the transferred balance becomes eligible for RMD deferral until you separate from service. It must be completed before the year the distribution is required, and only pre-tax IRA money transfers cleanly.
Is deferring an RMD always the better outcome?
No. Deferral pushes income into a later year, and if that year brings wages, Social Security benefits and a larger balance all at once, the combined bill can be worse. Savers in an unusually low-income year may prefer to take distributions voluntarily. The decision depends on the projected tax picture across several years, not one.
