Required Beginning Date (RBD)

What Is the Required Beginning Date (RBD)?

The required beginning date (RBD) marks the official date by which a retirement plan participant must begin to receive required minimum distributions (RMDs) from their accounts. For example, RMDs are required for individual retirement accounts (IRAs) and 401(k) plans, which coincides with the retiree's 72nd birthday.

On March 27, 2020, former President Trump signed into law a $2 trillion coronavirus emergency stimulus package called the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act waived RMD payments for 2020, including those for inherited IRAs. The waiver also applied to initial RMDs, which individuals may have delayed from 2019 until April 1. The waiver has not been extended and RMDs are back on track for 2021.

RMDs previously began at age 70½, but the age was raised to 72 following the December 2019 passage of the Setting Every Community Up For Retirement Enhancement (SECURE) Act.

Understanding the Required Beginning Date

Required beginning dates ensure that individuals do not hold retirement funds in their accounts indefinitely. Under U.S. law, retirement plans offer tax-advantaged investment options intended to give people an incentive to build savings.

In the case of tax-deferred retirement accounts, investors can avoid paying taxes on current income by saving it. To ensure investors use these accounts for their intended purpose and to avoid creating a perpetual tax-free investment vehicle, the Internal Revenue Service (IRS) requires account holders to take distributions from their accounts.

The actual required beginning date depends upon a plan’s terms, the type of retirement plan in question, and the employment status of the account holder. For IRAs, including SEP and SIMPLE plans, the required beginning date occurs on April 1 following the calendar year the participant reaches age 72.

If you turned age 70½ before Jan. 1, 2020, your RMDs are based on age 70½, not age 72.

In the case of defined-contribution plans such as 401(k) or 403(b) plans, the terms of the plan may allow participants who remain employed past age 72 to delay their required beginning date until April 1 of the first calendar year following their retirement. However, the option to delay distributions until after retirement does not exist for individuals who own 5% or more of the business that sponsors the plan.

Individuals who fail to take the full required minimum distributions from their plans, in years when they are required (not 2020), become subject to steep excise taxes on the difference between the required distribution and any distribution they did take.

Please note that the RMD rules also apply to Roth 401(k) accounts but do not apply to Roth IRAs, meaning an individual IRA established as a Roth.

Required Minimum Distributions and Inherited Accounts

Retirement account holders specify beneficiaries for their accounts in the event of their death. In these cases, the required beginning date and any existing required minimum distribution may change, depending on the beneficiary’s age and relationship to the deceased account holder.

Non-spouse individual beneficiaries typically must cash out the account within 10 years, as a result of the passage of the SECURE Act in December 2019. Previously, most such beneficiaries could choose between taking the distribution of the entire account within five years of the owner’s death or taking required minimum distributions based upon their current age.

Spouses acting as the sole designated beneficiary of a retirement plan have additional options. They may treat the account as though they owned it, using the rules for required beginning dates and required minimum distributions based upon their own age. They also may take distributions based upon the age of the deceased spouse, giving the beneficiary the option to use the required beginning date for the deceased for the inherited account.