Required Beginning Date (RBD) Definition

What is the Required Start Date (RBD)?

The Required Start Date (RBD) marks the official date on which a pension plan member must begin receiving minimum required distributions (RMD) of their accounts. For example, RMDs are needed to individual retirement accounts (IRA) and 401(k) planswhich coincides with the retiree’s 72nd birthday.

RMDs previously started at age 70.5, but the age was raised to 72 after the adoption in December 2019 of the Setting up each community for the improvement of retirement (SECURE) Law. 

Key points to remember

  • The Required Start Date (RBD) marks when retirement savers must begin taking Required Minimum Distributions (RMDs) from their 401(k) or IRA.
  • The RBD will often land on the date an individual reaches the age of 72.
  • RBD may be delayed in some cases if a retirement saver is still employed and contributing to a plan

Understand the required start date

The required start dates ensure that people do not hold retirement funds in their accounts indefinitely. Under US law, pension plans offer tax-efficient investment options designed to encourage people to save.

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

The actual start date required depends on the terms of a plan, the type of pension plan in question and the employment status of the account holder. For IRAs, including SEP and EASY plans, the required start date is April 1 following the calendar year in which the member reaches age 72.

If you reached age 70.5 before January 1, 2020, your RMDs are based on age 70.5 and not age 72.

In the case of defined contribution plans such as 401(k) or 403(b) plans, plan terms may allow participants who remain employed after age 72 to defer their required start 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 company sponsoring the plan.

Individuals who do not withdraw the full required minimum distributions from their plans, in the years in which they are required (not in 2020), are subject to a high excise taxes on the difference between the required distribution and any distribution they have taken.

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

Required Minimum Distributions and Legacy Accounts

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

Non-spousal individual beneficiaries must generally cash out the account within 10 years, following the adoption of the SECURE Law in December 2019. Previously, most such beneficiaries could choose between taking the entire account distribution within five years of the owner’s death or taking the minimum required distributions based on their current age.

Spouses acting as the sole designated beneficiary of a pension plan have additional options. They can treat the account as if they owned it, using the rules for required start dates and required minimum distributions based on their own age. They can also take distributions based on the age of the deceased spouse, giving the beneficiary the option of using the required start date for the deceased for the inherited account.

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