When can a taxpayer continue to defer distributions from their IRA?

A taxpayer can continue to defer distributions from their IRA up until they reach age 70½ due to the rules established by the Internal Revenue Service (IRS). Prior to this age, individuals are not required to take minimum distributions from their traditional IRAs and can allow their funds to remain invested and grow tax-deferred. This provision is designed to encourage retirement savings by permitting individuals to defer taxes on their retirement accounts until they begin withdrawing funds.

The stipulation regarding age 70½ is significant because it marks a threshold where the IRS mandates required minimum distributions (RMDs) for traditional IRAs. Once the taxpayer reaches this age, they must start taking distributions, which are then subject to income tax. This rule provides a safety net ensuring that individuals begin utilizing their retirement savings while also allowing them ample time to let their investments grow tax-deferred.

While other conditions may affect withdrawals or employment-related plans, such as situations involving active employees and specific retirement plan rules, the age aspect is a distinct and critical factor in determining when distributions must begin. Thus, the importance of the age 70½ threshold makes it the correct answer in this context.