Exceptions to the 401(k) rule

DEAR HARRY: My wife and I have been pretty frugal all our lives. Neither of us ever earned much money, so we had to watch our pennies. I am now 69 and my wife is 68. She retired last year as a result of an injury. I intend to keep working until the end of the line. This is partly out of financial necessity. I have a 401(k) plan that has accumulated to about $250,000. As long as I am working, we won't have to eat into it. However, there is an IRS requirement for a minimum withdrawal in the year I turn 70 1/2. Is there some way I can defer payment without penalty? Would it help to roll it over to an IRA?

WHAT HARRY SAYS: Lady luck is on your side! Normally, a taxpayer must take a required minimum distribution from a 401(k) by April 15 of the year following the year in which he or she turns 70 1/2. There is an exception for a person who continues to work (even part time). In that case, the distribution is required to be taken by April 15 of the year following retirement. For you, that means that your heirs are on the hook because you intend to work until you die. There are exceptions to the exception: It does not apply to 401(k)s from old employers. It never applies to IRAs. If either you or your wife has IRAs, the 70 1/2 age trigger applies. I like the idea of "wearing out, not rusting out."