I have an issue that, while affecting only a small group of people, might illustrate broader concerns around required minimum distributions, rollovers and retirement planning. I am 72, turning 73 in July. I had planned to defer all RMDs from my IRAs and self-employed 401(k)s until next year, understanding I would then take two RMDs in 2027. I also hoped to avoid taking any RMDs from my current employer’s 401(k), since I am still working full time and contributing to that plan.

I have $800,000 in a 401(k) at Fidelity from a previous employer. My plan was to roll it into my current 401(k), which accepts rollovers, allowing me to defer RMDs on those funds until retirement.

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Complications arose when my employer went bankrupt and was acquired by a new company. My employment, salary and benefits continued uninterrupted, but from November 2025 until about six weeks ago, the old 401(k) stopped accepting contributions, and the new plan was not yet operational or accessible for rollovers. Consequently, I could not transfer my funds from Fidelity during that period.

This month, I contacted Fidelity to initiate the rollover. I was told I must take an RMD this year before moving the balance. From what I understand, a distribution is mandatory; deferring receipt does not exempt one from the requirement. Fidelity explained that the RMD must be accounted for before the rollover. They cannot hold the RMD if the rest of the account is transferred, nor can funds leave the account until the required distribution is taken.

The RMD from this 401(k) will be about $25,000. My wife, the beneficiary, is 56. At a 35% tax rate, that’s roughly $8,750 in taxes I would prefer to avoid. I also have about $3 million across two IRAs from which I will take RMDs next year, and I am still earning my full salary.

Adding to the difficulty, Schwab, which administers my new 401(k), will not accept a direct institution-to-institution transfer. Their paperwork requires Fidelity to issue a check made payable to Schwab Trust Bank for the benefit of my account, which I must then deliver.

I strongly prefer not to take the RMD. It seems I am being penalized for moving the account: Leaving it at Fidelity requires no distribution, but attempting a rollover triggers one. One alternative would be for Fidelity to distribute the full balance (minus 20% withholding) to me, use $160,000 from an after-tax brokerage account to cover the withholding, then roll the full amount into Schwab. But the opportunity cost of tying up $160,000 with the IRS, along with potential capital-gains taxes from liquidating investments, likely approaches the cost of simply taking the RMD.

While I recognize this is a “first-world problem” — a high earner, still working in my 70s, fretting over less than $10,000 in taxes — I am frustrated. My careful planning was derailed by the unexpected bankruptcy and plan transition, and the requirement feels counterintuitive: I am forced to take a distribution only because I want to move the funds to a plan designed to defer future distributions.

I greatly admire your column for both its financial insights and its understanding of the psychological and family dynamics behind these decisions. Any guidance on how to handle this situation would be much appreciated.

To RMD or Not To RMD

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Sometimes, even the best-laid plans can’t surmount a brick wall.

And you, my friend, have come up against a brick wall on the eve of your 73rd birthday, when your first RMD is due, and there’s no way around it. RMDs must be distributed first during any year in which they are due, and they may not be deferred even if they are being rolled over into another tax-deferred account like a 401(k) or IRA. That rule is set not by Charles Schwab SCHW or Fidelity, but by the Internal Revenue Service. Uncle Sam has spoken.

That aforementioned brick wall comes with a proverbial shard of broken glass: Failure to take the RMD by the deadline — typically Dec. 31 — can result in a 25% penalty on the amount of that RMD not taken, the IRS says. If you are still working at 73 and do not own more than 5% of the company, you may be able to defer RMDs from only that employer’s plan until you retire (this does not apply to separate IRA accounts).

If you had indeed completed the rollover before the RMD year began — that is, before Jan. 1, 2026 — the funds would likely have merged into the current employer’s plan, and no 2026 RMD would have been required. That bankruptcy-related delay triggered this unwelcome outcome, so your frustration is perfectly valid, not that knowing that helps you now. But you didn’t have a crystal ball, and you played by the rules of the game.

You float the idea of taking a full distribution — with 20% mandatory withholding — replacing the withheld amount out of pocket, and completing a 60-day rollover. It’s a clever workaround and it would be technically feasible, but you are correct in that the opportunity cost and potential capital-gains taxes from liquidating other assets probably outweigh those tax savings. Take the RMD, then complete the rollover. (Beneficiaries do not affect the RMD calculation.)

So what in the name of Uncle Sam happened? You conflated two rules and may have tried to circumvent one with the other: First, if you are still working at 73 or older and your 401(k) is with your current employer, you can delay RMDs from that plan. Easy, right? Yes, on the face of it. However, that exception does not apply to old 401(k) accounts from previous employers. Your Fidelity account, as a result, is treated as a separate, inactive plan.

Rolling an old 401(k) into your existing employer’s plan is exactly how people resolve the RMD problem. As this is an old 401(k), Fidelity is correct that the RMD must be taken or formally accounted for before any rollover can occur. You may technically delay the actual withdrawal until April 1, 2027, but it will still be counted as your 2026 RMD. While you can delay taking that distribution, it must be addressed before any rollover of that account this year.

Thank you for your feedback on the Moneyist’s approach to family dynamics as well as financial shenanigans. You don’t have the former issue with your dilemma, but you have something that is not unrelated: a friendly psychological battleground of self-will and determination pitched against the rules of your retirement accounts and the IRS. It can be a creative, but ultimately frustrating, process when we try to find ways to avoid paying a tax or reducing our income, especially when you’re trying to keep a lid on Medicare premiums.

The solution to your problem is somewhat unavoidable: Work with Fidelity to take your RMD — either as cash distributed to you, subject to withholding, or directly deposited into a taxable account — and then complete the rollover to Charles Schwab, per their instructions. While it may feel punitive, this satisfies IRS rules and avoids the 25% penalty (or 10% if the RMD is corrected within two years). Outside of this problem, I have no doubt you will put your ingenuity to good use.

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