Must You Take a SIMPLE IRA RMD If Still Working?

A SIMPLE IRA, or Savings Incentive Match Plan for Employees, is a retirement plan offered by small businesses that allows contributions from both employees and employers. A feature of most retirement accounts is the Required Minimum Distribution (RMD), which mandates annual withdrawals once you reach a specific age. This leads to a common question: does still working affect the RMD rules for a SIMPLE IRA?

General RMD Rules for All IRAs

The Internal Revenue Service (IRS) has established rules for when retirement account holders must begin taking withdrawals. The age for beginning RMDs is 73 for individuals born between 1951 and 1959, and it rises to 75 for those born in 1960 or later.

For RMD purposes, the IRS groups all IRAs—including Traditional, SEP, and SIMPLE IRAs—into one category. This means the withdrawal requirements are consistent across these account types. Once an individual reaches the RMD age, they are obligated to start taking annual distributions from their IRAs.

Account holders must calculate the RMD for each IRA they own separately. However, they have the flexibility to withdraw the total RMD amount from any one or a combination of their IRAs. This aggregation rule applies only to IRAs and not to other types of retirement plans like 401(k)s.

The “Still Working” Exception Explained

A provision known as the “still working” exception allows an individual to delay RMDs from their current employer’s qualified retirement plan, such as a 401(k), if they continue to work past the RMD age. To qualify, the person must be employed by the company sponsoring the plan and cannot own more than 5% of that business. This exception defers the distribution requirement from that specific plan until they retire.

This “still working” exception does not apply to any type of IRA, including SIMPLE IRAs. The IRS considers IRAs personal retirement accounts, so their RMD rules are independent of an individual’s current employment status. The obligation to take an RMD from a SIMPLE IRA begins once you reach the specified age, regardless of whether you are still working.

The distinction lies in the relationship between the account holder and the plan. The exception for a 401(k) is tied directly to the current employment relationship with the plan sponsor. Since an IRA is not tied to a current employer in the same way, its RMD schedule is based solely on the account owner’s age.

Calculating and Taking Your SIMPLE IRA RMD

To calculate the RMD, you take the fair market value of your SIMPLE IRA as of December 31 of the previous year and divide it by a life expectancy factor. This factor is found in the IRS’s Uniform Lifetime Table, which is published in IRS Publication 590-B.

The deadline for taking your RMD is December 31 of each year. There is a special rule for your first RMD, which allows you to delay it until April 1 of the year following the year you reach your RMD age. Choosing this delay means you will have to take two distributions in that single tax year—your first and your second—which could result in a higher tax liability.

Failing to take your full RMD on time results in a substantial penalty. The IRS imposes an excise tax of 25% on the amount that was not withdrawn as required. This penalty can be reduced to 10% if you correct the shortfall within two years by withdrawing the funds and filing the appropriate tax form. Given the penalty, it is important to withdraw your RMD before the deadline.