Are you finally planning to sell your small business? Consider all the tax implications if you’ve entered your 70s and want to keep working for the company as an employee.

Strategy: Stay on as an employee-consultant. As a result, you don’t have to start taking required minimum distributions (RMDs) from your company retirement plan as long as you’re still working for the company. This “still-working” exception does not apply to IRAs.

Here’s the whole story: Generally, you must begin taking RMDs from IRAs and qualified retirement plans, like a 401(k) plan, after you’ve reached a specified age. Otherwise, you can be hit with an expensive tax penalty. The RMDs are taxable at ordinary federal income tax rates, currently topping out at 37%. The SECURE 2.0 Act bumped the starting age up to 73 for those who turn 72 in 2023 or later (scheduled to jump yet again to age 75 in 2033). So, if you turned 72 in 2023, you don’t have to take your initial RMD until after you turn 73 in 2024. SECURE 2.0 also reduced the penalty for failure to take RMDs from 50% of the shortfall to 25% (10% if the mistake is corrected in a timely fashion). The amount of the annual RMD is based on IRS life-expectancy tables and the value of the account on the last day of the previous year. For example, your RMDs for 2024 depend on the balance in your accounts as of December 31, 2023, regardless of their current value. Usually, the optimal approach is to postpone RMDs for as long as you can, so you can continue to benefit from tax-deferred growth in your accounts. But you have to start taking RMDs when you reach the magic age … right? Not necessarily. Under the “still working” exception, you don’t have to take RMDs from a company-sponsored qualified plan if you continue working for the company as an employee, and you don’t own 5% or more of the company. Caution: Family attribution rules apply, so if you passed the business to the younger generation, you could be ineligible for this exception. Tip: The “still working” exception is not available for IRAs.