Required Beginning Date (RBD) Definition

What Is the Required Beginning Date (RBD)?

The term required beginning date (RBD) refers to the official date by which a retirement account plan participant must begin taking required minimum distributions (RMDs) from their accounts. The RBD is meant for the original distribution. This must be taken by April 1 of the year after an account holder reaches 73, 72, or 70½, depending on the circumstances. Subsequent distributions must be taken by December 31 once the account holder satisfies the rules for the RBD.

Understanding the Required Beginning Date

Under U.S. law, retirement plans offer tax-advantaged investment options intended to give people an incentive to build savings. Required beginning dates ensure that individuals do not hold tax-deferred retirement funds in their accounts indefinitely. RBDs apply to employer-sponsored accounts like the 401(k), as well as traditional individual retirement accounts (IRAs), rollover IRAs, SEPs, or SIMPLE IRAs.

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.

RMDs kick in by April 1 the year after you turn:

• 73, if you reached that age on or after Jan. 1, 2023
• 72, if you reached that age between Jan. 1, 2020, and Dec. 31, 2022
• 70½ for anyone who reached that age before Dec. 31, 2019

Once the RBD passes, all subsequent distributions must be taken by December 31 each year.

Individuals who fail to take the full required minimum distributions from their plans, in years when they are required become subject to steep excise taxes on the difference between the required distribution and any distribution they did take.

Required Beginning Dates (RBDs) 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.

Spouse

If the account holder dies on or after the RBD, the inheriting spouse may choose one of the following options:

• Treat the account as their own and apply the rules to themselves accordingly
• Take the distributions based on their own age
• Take the distributions based on the deceased's age

Things change if the account holder dies before the RBD. In this case, the inheriting spouse may decide to do one of the following:

• Treat the account as their own and apply the rules to themselves accordingly
• Liquidate the entire account by the fifth year after the account holder's death
• Take distributions based on the spouse's age

Non-Spouse

Non-spouse individual beneficiaries also have a few options available to them based on whether the deceased account holder died before or after their RBD. If they died before, the non-spouse beneficiary may decide to:

• Liquidate the entire account by the fifth year of the account holder's death
• Use their own age at year-end after the original owner's death
• Reduce the beginning life expectancy by 1 for every year after the owner's death

If the account holder died on or after the RBD, the options are to take distributions based on:

• The age of the owner or the beneficiary in the year of the account holder's death, whichever is younger
• The beneficiary’s age at the end of the year after the account holder's death
• The oldest age if there are multiple beneficiaries
  

The beneficiary may also reduce the life expectancy by 1 for each following year. Or they may choose to take the owner’s RMD for the year of their death.

The Bottom Line

Individuals have a variety of options available to set aside money and create a nest egg for the future. Traditional IRAs or employer-sponsored plans like the 401(k) offer great benefits for retirement planning. But one thing to keep in mind is the required beginning date. This is the date at which you'll have to start taking your required minimum distributions. The rules are generally the same for most accounts, but there may be certain distinctions with others—especially if you inherit one as a beneficiary. Be sure to check with the IRS or a financial professional to know what rules apply to you and your situation so you don't lose out in the end.