He's 87 and Has Never Taken a RMD From His 401(k). Here's His Secret. -- Barrons.com

By Neal Templin

Fuller Bazer is 87 years old and has never taken a required minimum distribution from his $2 million tax-deferred retirement account.

He isn't breaking the law. Bazer is still working as a full professor at Texas A&M University College of Agriculture & Life Sciences and tax law doesn't require him to take RMDs until he retires later this year.

Bazer is a top researcher on reproductive biology and he is still working because he loves the job -- not to save taxes. Nonetheless, he is quite aware that not taking RMDs for 17 years allowed his retirement account to continue growing.

"I didn't need the money and I knew that if I wanted to retire and have the same amount of money I have now, the RMDs would allow me to have that," says Bazer, who was designated a distinguished professor by Texas A&M, where he earns a $328,000 salary.

Annual minimum distributions are required from tax-deferred accounts such as individual retirement accounts (IRA)s, 401(k)s and 403(b)s once you turn 73 currently. For someone of Bazer's age, they were required when he turned 70.5.

The still working exception has saved Bazer hundreds of thousands of dollars of RMDs over the years, and tens of thousands of dollar in taxes, says Natalie Pine, his financial advisor.

"He would have had to pay at a high rate because of his income," she says.

The tax break only works for the retirement account of the company or institution where you remain employed as long you don't own at least 5% of the business, notes David Frisch, a certified public accountant and financial advisor in New York and Florida. The custodian of the account could also require you to make RMDs, even if the IRS doesn't.

Most seniors don't know about the still working exception, Frisch says. But he adds, "We saved a couple of clients a whole lot of money by doing this."

How many Americans can take advantage of the still working exception is unclear, but more are working into their 70s and beyond. In 2020, 8.9% of Americans over 75 were still working. The labor participation rate for that group is forecast to rise to 11.7% by 2030, according to the U.S. Bureau of Labor Statistics.

Joseph Favorito, a financial planner in Melville, N.Y., had a client who was making a big salary and worked until his late 70s. He was able to delay RMDS from his workplace account.

"Since he was in a pretty high tax bracket," Favorito says, "I didn't want to add in that additional income."

Even if you qualify for the still working exception, you are required to make RMDs from individual retirement accounts and from 401(k)s or 403(b)s at places where you no longer work.

There is a workaround for this requirement. You can often roll over assets from other tax-deferred accounts into your current workplace plan so that they, too, will be covered by the still working exception. It depends on the rules of your workplace plan.

You don't have to be working full time to qualify for the tax break. The IRS says you must be a current employee but doesn't require a minimum number of hours worked.

One caveat: The still working exception allows you to delay RMDs, not to dodge them completely. In fact, delaying RMDS will result in bigger ones when you finally do retire. Depending upon your current tax bracket, that may not be to your advantage.

Jim Bradley, a financial advisor in Bangor, Maine, has told certain clients they would be better off taking the RMD now rather than delaying it with the still working exception.

"It gets to the point where I sometimes call out the RMD being a bigger bomb when it hits," he says. "They don't seem too concerned about it."

In other cases, it has allowed workers to have a more secure retirement when they do call it quits. Michael Robbins, 78, a Bradley client, is an associate professor of psychology at the University of Maine who is planning to retire later this year.

He hasn't made any RMDS from his $1.4 million University of Maine deferred-tax retirement account.

If not for the still working exception, he would had to start taking RMDs at age 70.5, when his retirement account had $750,000, Robbins says. If he had retired then, Robbins says, the lower balance would have left him more vulnerable to market downturns.

Now he feels his retirement is more secure, and he and his wife Marcia are more likely to pass wealth to their heirs.

"The account is not likely to be depleted," he says. "There's plenty to maintain our security and also for bequests."

Write to Neal Templin at neal.templin@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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June 13, 2026 02:00 ET (06:00 GMT)

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