The 401(k) Rule That Matters Most in the Year You Turn 65

Turning 65 is a big milestone for many people. This is the traditional retirement age, and if you're on track, this could be the first year in decades that you aren't required to report to a job. However, even though you may have reached your retirement savings goals, there is still retirement planning to do.

In fact, the ages between 65 and 73 are some of the most important financial planning windows, and also when some of the biggest financial mistakes happen. Here is what you need to know about this crucial planning window.

Waiting too long to plan is a big retirement mistake

Too many people wait until they turn 73 to make a retirement withdrawal plan. That's because the SECURE 2.0 Act raised the required minimum distribution (RMD) age from 72 to 73. 

However, retirees who wait until later to make decisions are missing a key opportunity to review accounts, estimate taxes, and decide whether or not to use strategies like Roth conversions to lower their tax liability in the future.

The peak conversion opportunity between 65 and 72

A Roth conversion is when someone moves money from a traditional 401(k) or Traditional IRA into a Roth IRA. Because you use pre-tax money to fund traditional accounts, converting money into a Roth account means you have to pay taxes on the amount you convert. However, once you do, your withdrawals from your Roth account are tax-free in the future (as long as the money is in the account for at least five years).

Converting money after you've stopped working but before you take Social Security or other retirement withdrawals means your income is lower now than it may be in the future. So, it can be more tax advantageous to complete a Roth conversion after you turn 65 and stop working, but before you turn 72.

The RMD working exception: Some people can delay withdrawals

Interestingly, employees who want to continue working at age 73 and who own less than 5% of the company they work for are allowed to delay RMDs. Once they stop working and retire, that's when their RMDs start. 

This only applies to the retirement plan that the employee currently contributes to. That means if you have an old 401(k) from a previous job, the RMD age of 73 would still apply.

The double-RMD trap retirees need to know

Many retirees are surprised to learn they can slightly delay their first RMD because they can either take it the year they turn 73 or delay it until April 1 of the following year. Delaying it seems like a good idea because it gives your money more time to grow; however, you'll still have to take your next distribution when you turn 74.

That decision can create a double-RMD trap where you take out money twice in the same year. The result is that you could be in a higher tax bracket, which not only impacts how much you pay in taxes but could also impact other retirement costs like Medicare IRMAA surcharges.

QCDs can reduce taxable IRA withdrawals

For those who are worried about increasing their taxable income because of IRA withdrawals, one option is to make a QCD, or Qualified Charitable Distribution. This is a unique type of donation where retirees can use money from their IRAs and send it directly to charity. As of 2026, retirees can make QCDs of up to $111,000 a year.

This advanced retirement strategy requires some thought and planning, and it's only available with IRAs. So, 401(k) accounts don't qualify.

Your withdrawal order matters when it comes to taxes

If you have several types of retirement accounts, like 401(k)s, IRAs, and HSAs, it can be hard to know whether to withdraw money from these accounts one at a time or in what order to do it. 

Some financial experts recommend withdrawing from taxable accounts first, then tax-deferred accounts, and finally tax-free accounts like Roth IRAs. Others believe taking a smaller amount from each account every year is a better strategy. What's best for one person might not work for another, so it's a good idea to ask for help when making a withdrawal strategy if you need it.

Where to get help with your retirement strategy

If you're not sure whether or not it's the right time to convert your traditional retirement accounts into Roth accounts, consult with a financial advisor. 

A financial advisor can look at your entire financial plan, including your income streams, assets, and debt, if applicable, and make suggestions on the best next steps to take before you turn 73.

Bottom line

Turning 65 is an ideal time to plan and prepare for future retirement years. That's because it's your last window before you turn 73 and the Required Minimum Distribution (RMD) rules kick in. 

Get your retirement plan organized, convert traditional accounts to Roth accounts (if it makes sense for you), and meet with a financial advisor if you have questions.

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