We’ve read articles about RMDs (required minimum distributions), but we haven’t heard much about a similar acronym, RBD (required beginning date). Interestingly enough, RBDs apply to RMDs. In fact, a RBD is the first date you are required to take an RMD.
The required beginning date for required minimum distributions from traditional IRAs (Individual Retirement Arrangements) is April 1st of the year after the year in which the account holder turned the age of 72. So, if I turned 72 this year, I would have to take my RMD no later than April 1, 2023.
When it comes to Roth IRAs, there is no RBD because minimum distributions are not required in Roth IRAs.
Because minimum distributions are also required in employer sponsored plans, there is a required beginning date for TSP distributions. Both the traditional TSP and the Roth TSP require that you take minimum distributions. If you are separated from your federal job (by retirement or otherwise), the RMD and RBD rules that apply to traditional IRAs also apply to both your traditional and Roth TSP balances.
If, on the other hand, you are not yet separated from your federal job when you attain the age of 72, you do not have to take a required minimum distribution from your TSP. In this instance, your RBD would be April 1 of the year following the year in which you separated from federal service. So, if I were over the age of 72 and retired on December 31, 2022, my RBD would be April 1, 2023.
But here’s a curve ball, the April 1st date only applies to the initial RMD! Subsequent RMDs must be taken by December 31st. If I waited until April 1, 2023 to take my initial required distribution, I would have to take another one by December 31, 2023. This may be all well and good, but, if the two RMDS (the 2022 one taken on 4/1/2023 and the 2023 one taken on 12/31/2023) added enough income to push me into a higher tax bracket, it might turn out being neither well nor good.
Required beginning dates also can apply to beneficiaries who inherit your IRA or TSP. One of the changes from 2020’s SECURE Act eliminated the “stretch IRA” for most beneficiaries other than spouses. Designated beneficiaries who are not “eligible” (i.e., most non-spousal beneficiaries) are required to completely empty the inherited IRA within 10 years of the date of inheritance. Let’s say that your child (a non-eligible designated beneficiary in most cases) inherits your IRA or TSP – they might, or might not, have to take required minimum distributions during the 10 year period in which they are required to drain the account. If you died before your RBD, they would not have to take RMDs throughout the 10 year period. If, on the other hand, you had already reached your RBD, your beneficiary will have to take RMDS (based on their age) for the period (not to exceed ten years) that they hold the IRA.
This is way more confusing than it was even a few years ago. When tax laws are changed, they are rarely simplified; they are usually made more complex. Make sure that you have an advisor and accountant who keep current with the tax and retirement laws.
Calculator: See your time to retire under FERS ticking away