10 Things You Need to Know About the Required Beginning Date (RBDs) for IRAs
If you have an IRA, you’ve probably heard the term “required beginning date” or “RBD” many times. Everyone who owns an individual retirement account should know and fully understand this date. It’s also important for all listed beneficiaries of an IRA to know this term.
Walking my clients through this process helped me to narrow down 10 things you need to know about your RBD.
10 Things to Know About RBDs:
- The first minimum distribution (RMD) must be taken by your required beginning date (RBD).
- Your RBD will always be April 1st of the year following your 70 ½ birthday. This is a standard date for all IRA owners and no exceptions apply.
- That said, there are two exceptions to the April 1 RBD for what we call “plan participants”. First, the “still working” exception. This is for anyone still working for an employer plan. Second, the “old money” exception, which is for 403(b)s. These exceptions do not apply to IRAs.
- You are allowed to delay your first RMD until April 1st of the following year but are not delayable for any future RMDs. Your required minimum distributions are always held to the December 31st deadline of that same calendar year. Beware, by delaying until April 1st of the next year, will require that you take double RMDs that year—which is more taxable income.
- If the IRA owner passes away before their RBD, there is no RMD due for the year following their death—even if they reached the age 70 ½.
- Additionally, beneficiaries are able to stretch the distribution requirements over the life expectancy or use the five-year rule.
- If the IRA owner passes after their RBD, their beneficiary(s) must take the year-of-death RMD if it was not already taken. Otherwise, the beneficiary(s) will face penalties.
- In this situation, the five-year rule is not an option.
- If the IRA owner passes on or after their RBD, the beneficiary(s) can take the RMDs over their own life expectancy or the IRA owners, whichever is longer.
- Roth IRAs do not have required beginning dates because Roth IRA owners are never subject to required minimum distributions during their lifetime.
Following these 10 rules is a great place to start if you are an IRA owner or a listed beneficiary. You can also check out our post on IRA accounts and charitable distributions for more information. However, individual retirement accounts and RMDs are complicated and intricate.
Seek out professional help to make sure you understand each aspect of your requirements and to avoid any penalties or hefty fees.