Tax rules require most retirement account owners who are subject to required minimum distributions (RMDs) to begin withdrawals at age 73. However, there is an exception to this rule for certain individuals who continue to work, called the “still-working exception.” Here is what you need to know about this strategy to delay RMDs.

Plans Only

The still-working exception applies only to employer plans. It does not apply to IRAs, ever (and that restriction includes SEP and SIMPLE IRA work plans). You may still be working but that will not help you delay RMDs from your IRA. Also, the exception will only apply to the plan of the company for which you are still working. If you have other funds in other company plans, it won’t help you with those.  Not all plans allow the still-working exception. Most do, but it is not required. You can’t take advantage of the exception if your plan doesn’t allow it.

Who Is “Still Working”?

Are you “still working”? This can be tricky because there is no official guidance from the IRS on this. There is no requirement that you work a certain number of hours a week in order for the exception to apply. A part-time position could be considered still working for purposes of this exception. When you use the still-working exception, then RMDs begin in the year you separate from service – even if your last day of work is December 31 of that year. Your required beginning date (RBD) is April 1 of the year after separation from service.

More Than 5% Owner

You can’t use the exception if you own more than 5% of the company for which you are still working. This is a one-time determination. If you are a “more than 5% owner” in the year you turn age 73, you will never be able to use the still-working exception on that company plan, even if you no longer own more than 5% of that same company in the future. When it comes to determining whether you are more than a 5% owner, it’s a family affair. The analysis starts with your personal ownership in the business but does not end there. The Tax Code’s family attribution rules apply. Any ownership in the business by your spouse, child, or grandchild will be included when making the call as to whether you are more than a 5% owner.

Rollovers

If your plan allows, you can roll over other retirement accounts to your company plan where you are still working and delay RMDs on these funds, too. Any RMDs for the year would not be eligible for rollover, nor would any after-tax funds from your IRA.

Downsides

Delaying your RMD using the still-working exception may sound like a good strategy, but there are downsides you should consider. You may face restrictions in the plan that would not apply to an IRA. Also, eventually all the funds in the taxable retirement account must be distributed, and there will be a tax bill that cannot be avoided. You must begin taking RMDs later, which means you will be taking larger RMDs. Larger RMDs mean more income taxes, resulting in the possibility of your Social Security income being taxed, and you could lose out on deductions, credits, exemptions and phase-outs.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

During our recent Ed Slott and Company’s Instant IRA Success workshop in Brooklyn, NY, we were presenting information about qualified charitable distributions (QCDs) when an audible groan emanated from the crowd. Over the grumbling, an exasperated woman’s voice was heard making a loud complaint. The attendees were not criticizing the presenters or any part of the program. What they were frustrated with was news from the IRS.

In the “2026 Instructions for Forms 1099-R and 5498,” the IRS included the following language on the very first page: “Code Y for box 7a on Form 1099-R. We added code ‘Y’ to the list of codes for box 7a to identify a qualified charitable distribution (QCD). See QCDs, later. For tax year 2026, the use of code Y to report a QCD is optional. If you are completing and filing a 2026 Form 1099-R, you may choose, but are not required, to enter code Y in box 7a.”

A QCD is a great way for charitably inclined IRA owners to donate. As long as the funds are properly distributed to the charity and all the QCD rules are followed, then distributions (up to $111,000 in 2026) can be excluded from income. For IRA owners subject to taking required minimum distributions (RMDs), a QCD can even offset all or part of that income. It’s a win/win.

What has been the problem with QCDs is not the QCD itself, but the reporting of the donation. Historically, IRA custodians were not required to report a QCD. There was never a code on Form 1099-R to identify this special distribution. It was up to the taxpayer to inform the IRS on the tax return that a QCD had been completed (or to tell the tax preparer to do so). As a result, QCDs were often not reported, resulting in a taxable distribution.

On May 12, 2025, the IRS released instructions for the 2025 Form 1099-R. Those instructions announced for the first time that the IRS had created a new “Code Y” to identify a QCD on the 1099-R. This was welcome news to tax preparers and financial advisors. Since the new code announcement came mid-year, it was no surprise that the IRS made it optional for 2025.

But apparently this ship takes time to turn. Upon release of the 2026 “Instructions,” the new code Y is again listed as an optional feature. Hence, the groans from the crowd.

While I understand the frustration, I also understand the optionality of the code for at least another tax year. Our guess is that the IRS is allowing IRA custodians time to implement rules and paperwork to cover their tails in the event of a “bad QCD.” It’s not unreasonable to think that IRA custodians will build some sort of “hold harmless” language into their custodial documents to avoid being held liable for placing a Code Y on a 1099-R, even if the distribution didn’t qualify as a QCD. After all, an IRA custodian does not want to police the credentials of every charity. And how will the custodian know if a person hasn’t already hit the annual QCD cap from another IRA at a different institution? These reasons likely explain why “Code Y” is optional again in 2026.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

Question:

Hello,

I’m married, filing jointly, and I have been converting my traditional IRA to Roth this year. If I convert too much and trigger higher Income-Related Monthly Adjustment Amount (IRMAA) charges, can I do a recharacterization to remove the overage?

Thank you,

Terri 

Answer:

Hi Terri,

IRMAA is a surcharge added to your Medicare premiums. It is calculated using income reported on your federal tax return from two years prior. A conversion done in 2026 will be included in income for this year and can impact IRMAA surcharges for 2028. You won’t know if you are over the 2028 brackets until they are released in 2027. Recharacterization of Roth IRA conversions was ended by Congress back in 2018. Conversions are now irrevocable and cannot be undone. If a conversion in 2026 pushes you over an IRMAA bracket in 2028, that conversion cannot be reversed. If you are concerned about future IRMAA charges due to an increase in income because of your 2026 Roth conversion, you may want to investigate other ways to lower income for the year.

Question:

Hello,

My wife inherited an IRA from her father who died in 2019. She kept the IRA as an inherited IRA and chose to distribute the proceeds over her life expectancy. She named me, her husband, as the beneficiary of this inherited IRA. Should she die before me, what are my options with the inherited IRA?

Thanks for your help.

Answer:

If you inherit this IRA from your wife, you will be a successor beneficiary. She is the original beneficiary of her father. As the successor beneficiary, you would be subject to the 10-year rule beginning in the year of your wife’s death. During the 10-year period, annual distributions based on your wife’s single life expectancy would need to continue. You would not be able to do a spousal rollover to your own IRA, even though you are inheriting the account from your wife. This is because you are a successor beneficiary.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

The June 15, 2026 Slott Report outlined the barriers preventing 401(k) and other plan participants from accessing their plan funds while working. The June 24, 2026 article discussed in-plan withdrawals as one way around those barriers. Another way to tap into plan funds while working is to take a plan loan. Company retirement savings plans are allowed to (but not required to) offer loans. According to a recent survey by Vanguard, 82% of 401(k) plans it services allow participants to borrow from their plan. (Loans are not allowed from IRAs, SEP IRA plans, or SIMPLE IRA plans.)

Plan loans are generally limited to the lesser of 50% of your vested account balance or $50,000. Your employer can allow an exception to this rule: If 50% of your vested account balance is less than $10,000, you can still borrow up to $10,000.

Example 1: Cher participates in a 401(k) plan that allows loans. Her vested account balance is $16,000. If the plan doesn’t allow the exception, the most Cher can borrow is $8,000. If the plan allows the exception, she can borrow up to $10,000.

Many plans limit participants to one outstanding loan at a time. But some plans do allow participants to take out a second loan while one remains outstanding. The amount of a second loan is limited by the outstanding balance of the first loan.

Generally, you must repay a plan loan within 5 years. But a loan used to purchase your principal residence can have a longer repayment period, usually 10 or 15 years. Loans must be repaid in substantially equal amounts made at least quarterly. Most plans require repayment through payroll deduction.

Even if your plan offers in-service withdrawals, borrowing from plan assets may be a better option for these reasons:

• Loans are usually available at any age (even before 59½) and for any reason.
• A loan that complies with the maximum dollar limits and the repayment rules is not considered a taxable distribution or subject to penalty, even if taken from a pre-tax account.
• Loans are always repaid to the plan, whereas withdrawals usually cannot be repaid.

However, there’s one significant downside to taking a plan loan. If you leave your employer with an outstanding loan balance that you can’t pay off, your plan account may be offset by the loan balance. That balance is considered a distribution subject to tax and possible penalty. You can avoid the tax and penalty hit if you can come up with the funds to roll over the unpaid balance to an IRA. The rollover deadline is October 15 of the year following the year the offset occurs.

Example 2: Sonny, age 50, terminates employment on July 15, 2026, with a $200,000 401(k) account balance and a $40,000 outstanding loan balance. Sonny doesn’t have the funds to repay the loan balance. On August 15, 2026, the plan offsets his $200,000 account balance by the $40,000 loan balance and distributes $160,000 to him. He rolls over the $160,000 to an IRA within 60 days. Sonny has until October 15, 2027 to find other sources to replace the $40,000 so he can complete a full rollover. Otherwise, he will owe taxes on the $40,000 and a 10% early withdrawal penalty of $4,000 for 2026.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

The SECURE Act of 2019 changed many rules for inherited IRAs. However, it left intact the rules for non-living (non-person) beneficiaries, such as an estate. For these non-designated beneficiaries (NDBs), the same two possible payout options still exist:

1. If death occurs before the owner’s required beginning date for starting required minimum distributions (RBD), payments must be made under the 5-year rule. The account must be emptied by December 31 of the 5th year after the year of death. This is the only time the 5-year payout rule is applicable — when a person dies before the RBD with an NDB. There are no annual required minimum distributions (RMDs) required within the 5-year period. Because Roth IRAs are not subject to lifetime RMD requirements, all Roth IRA owners are considered to have died before their RBD. Therefore, whenever an estate or other NDB is the beneficiary of a Roth IRA, the 5-year rule will always apply.

2. If death occurs on or after the RBD, annual stretch RMD payments are made over the deceased IRA owner’s remaining single life expectancy, had he survived. This is known as the “ghost-life rule.” The ghost-life rule will never apply to an NDB who inherits a Roth IRA. Since lifetime RMD requirements do not apply to Roth IRAs, a Roth IRA owner cannot die on or after the RBD.

To calculate the ghost-life rule payments, start with the single life expectancy factor of the deceased account owner in the year of death. For the first RMD (for the year after the year of death), use that factor minus 1.0. For succeeding years, use the preceding year’s factor minus 1.0. (This is different from standard inherited IRA RMD calculations in which the first RMD uses the age of the beneficiary in the year after the year of death.)

Example: Saldies at age 87 (well after his RBD) and leaves his IRA to his estate (an NDB). Sal’s son, Manny, age 40, inherits through the estate. RMDs to Manny would be based on his father Sal’s remaining single life expectancy. The first RMD in the year following the year of death would be based on Sal’s 6.1-year remaining single life expectancy (7.1 for an 87-year-old, minus 1.0).

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

QUESTION:

I just wanted to verify that a 403(b) plan is not subject to the pro-rata rule when doing a Roth IRA conversion. Can you please let me know if this is correct?

Thanks!

Lynn

ANSWER:

Lynn,

You are correct. When doing a Roth IRA conversion, the pro-rata rule looks at all of a person’s traditional IRAs, SEP IRAs and SIMPLE IRAs. Accounts that the pro-rata rule does not consider are inherited IRAs, other Roth IRAs, and work plans like a 401(k) or 403(b).

QUESTION:

Is a participant in a 401(k) plan, who moves from full-time to part-time status, but continues to work with the same company that sponsors that plan, still allowed to delay their required minimum distribution (RMD)?

ANSWER:

If a 401(k) plan includes the optional design feature of the still-working exception (and most plans do), then participants can delay their first RMD until April 1 of the year after the year they separate from service. However, there is no universal definition of “still working.” Part-time status normally would qualify, but we suggest you confirm with your 401(k) plan provider to see what definition of “still working” the plan uses. 

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

From its onset, I have been a fan of the concept of Trump accounts. Created by the One Big Beautiful Bill Act (OBBBA), this new savings vehicle for children is now up and running as of July 4, 2026. At their core, Trump accounts have the potential to supercharge the very long-term retirement planning for kids. Conservative mathematical assumptions and the magic of compounding could result in a multi-million-dollar account for a toddler when he is age 60.

For some background information, a Trump account is a long-term retirement savings vehicle that comes packed with many rules and restrictions. For example, the maximum annual contribution (as indexed) is $5,000. But since Trump accounts allow for many types of contributions from different sources, that annual limit can be exceeded. In fact, the annual maximum can be surpassed in the very first year for some Trump account owners. How so? The initial one-time $1,000 Federal government contribution for children born between January 1, 2025, and December 31, 2028, does not count against the annual maximum.

But since last summer when Trump accounts were first announced, some weird stuff keeps happening.

Trump accounts are established by an election made on IRS Form 4547. (That new form and form number in-and-of itself received more than a few eyerolls and groans.) One way to access the form and establish the account is via the website www.trumpaccounts.gov. But who is authorized to make the election to establish the account? There is an order of priority, as follows: Legal guardian; parent; adult sibling; grandparent; state child welfare agencies for foster children. Where things got weird was, if an eager grandparent jumped the gun and opened a new Trump account ahead of the child’s parent…the grandparent could be committing perjury! See the Slott Report entry which discusses that conundrum here: Grandparents should be very careful before opening Trump accounts.

As mentioned, contributions from different sources can be made to Trump accounts. One of these sources is tax-exempt organizations who make contributions to a “targeted group” of beneficiaries. It was originally understood that all contributions had to be made in the form of cash. But an odd development with these types of contributions sprung up just a few days ago, when the U.S. Department of the Treasury announced it will accept large philanthropic contributions of public company stock as Trump account contributions. Not only does this seem to fly in the face of current tax code provisions, but it also introduces new questions, like:

• If a large donor wants to give $150 per child, how can they do that if the stock price is, for example, $300 per share? One can’t donate partial shares (without a stock fund).

• Why was this rule made? To avoid a billionaire having to sell millions of shares that might depress the overall stock price? Is this a tax play to maximize a deduction?

It’s possible this could all be sorted out and explained away. So, while I am still a fan of the concept and possibilities of Trump accounts, it would be nice if the weird stuff went away.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

On July 1, 2026, the Treasury Department announced the investment options for initial Trump account contributions.

In the One Big Beautiful Bill Act (OBBBA), Congress imposed strict investment restrictions on Trump account contributions made before the year the child turns age 18 (i.e., during the “growth period”). Before that year, Trump accounts must be invested in an “eligible investment.” An eligible investment is a low-cost mutual fund or exchange-traded fund (ETF) that tracks the S&P 500 index or any other “qualified index” comprised of stocks in primarily U.S. companies, and that does not use leverage.

The IRS has said that a mutual fund or ETF will be considered “low cost” if the sum of its annual fees and its annual expenses is less than 0.1% of the value of the fund’s net assets. A “qualified index” does not include any industry or sector-specific index but may include an index based on market capitalization. Therefore, a mid-cap or small-cap U.S. stock fund or ETF would qualify. Under a safe-harbor rule, an index will be treated as comprised of “primarily” U.S. companies if those companies represent at least 90 percent of the index based on their weighting in the index.

The Treasury Department selected the State Street SPDR Portfolio S&P 500 ETF (SPYM) as the initial Trump account investment. According to the July 1 announcement: “The fund was selected to provide broad exposure to the U.S. stock market while maintaining expenses well below the statutory fee limitation.”

The Treasury also said that in the coming months, parents will be able to allocate funds among four other options:

• iShares Core S&P 500 ETF (IVV)
• Vanguard Total Stock Market ETF (VTI)
• State Street SPDR Portfolio S&P 1500 Composite Stock Market ETF (SPTM)
• iShares Core S&P Total U.S. Stock Market ETF (ITOT).

If no investment is elected, SPYM will be the default investment.

At some point, parents (or other persons responsible for Trump accounts) also will be able to roll over funds to another approved custodian offering different investment options.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

Question:

If someone has a SIMPLE IRA and is interested in doing a backdoor Roth IRA conversion, does the SIMPLE IRA count under the pro-rata rule?

Answer:

The pro-rata rule that determines the taxation of a backdoor Roth IRA conversion includes all of a person’s IRAs owned as of the end of the calendar year in which it is done. This includes SEP and SIMPLE IRAs, but not Roth IRAs or inherited IRAs. Even IRAs held at different financial institutions are aggregated.

Question:

Hi Mr. Slott,

I have a dual citizenship, U.S. and The Philippines. I have an IRA and would like to have my chronically ill/disabled nephew as one of my beneficiaries. Can he be my beneficiary if he is not a U.S. citizen?

Thank you so much,

Erlinda

Answer:

Dear Erlinda,

Yes, a non-U.S. citizen can be named as beneficiary, whether the beneficiary lives in the U.S. or abroad. If the beneficiary is a nonresident alien, distributions from the inherited IRA may be subject to a 30% U.S. withholding tax, unless reduced by a tax treaty between the U.S. and the country of residence.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

In just a few days, on July 4, Trump accounts will be available. As we come down to the wire, the IRS has stepped in to provide a safe harbor to address concerns about potential gift tax issues with contributions.

The Gift Tax Issue

Contributions to Trump accounts do not qualify under the annual gift tax exclusion ($19,000 for 2026). Only gifts of “present interest” qualify. A gift of “present interest” means a gift that the recipient can immediately access and use. Trump accounts are not considered gifts of “present interest” because they cannot be accessed until the year the child turns 18.

Congress did not include a provision in the One Big Beautiful Bill Act (OBBBA) to exempt Trump accounts, like it did many years ago for section 529 plans. Unless Congress or the IRS intervened, there was concern that a gift tax return (Form 709) would be required for individuals making Trump account contributions.

The Fix

On June 29, the IRS issued Rev. Proc. 2026-25. This guidance provides a gift tax reporting safe harbor for Trump account contributions made before the year the child reaches age 18.

Under the safe harbor, if certain requirements are met, contributions made by individual donors to Trump accounts in a given year will not be subject to gift tax reporting requirements for that year.

The IRS said that a safe harbor was necessary for several reasons. For many of those who contributed to Trump accounts, the cost and other burdens of complying with gift tax reporting requirements could outweigh the anticipated financial savings benefit of making contributions. In addition, gift tax reporting compliance by Trump account contributors could dramatically increase the burden on the IRS, who would have to process gift tax returns for taxpayers who would be unlikely to ever be subject to gift, estate, or generation-skipping tax. Also, according to the IRS, the fact that nearly six million Trump accounts have already been opened means the number of gift tax returns filed annually could be expected to increase from roughly 300,000 to several million.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.