Required Minimum Distribution (RMD) Age and the Required Beginning Date (RBD)

As the workforce ages, and many federal employees are currently retiring — with many employees retiring within the next five to 10 years — questions on required minimum distributions (RMDs) are becoming prevalent.

In the first of four columns discussing RMDs, this column discusses the RMD age and the required beginning date (RBD).

SEE ALSO:

• When RMDs Can Be Combined and Taken from One Retirement Account
• Thrift Savings Plan RMD and IRA Planning Strategies

Relationship Between the RBD and Lifetime RMDs

When a traditional IRA owner or a qualified retirement plan participant (including a Thrift Savings Plan participant) reaches a certain age or employment status, lifetime RMDs must begin. That age has been adjusted several times since 2019, a result of the passage of SECURE Act 1.0 and SECURE Act 2.0. The following table summarizes the RMD age according to an IRA owner’s or a qualified retirement plan participant’s date of birth:

The first RMD year is the calendar year in which an IRA owner becomes one of the ages listed in the table. The current RMD age is 73. It makes no difference when during the calendar year a traditional individual IRA owner becomes age 73. It could be January 1st, December 31st, or some date between. The first RMD can be taken anytime during the year the IRA owner becomes age 73. The first RMD – and only the first RMD – can be delayed until April 1st following the year the traditional IRA owner becomes age 73.

What is the purpose of the three-month delay in the first year traditional IRA RMD? The delay is allowed for the first time IRA owner “to figure things out”. But there is a downside to delaying the first year RMD into the second year. The first year RMD must be taken by April 1st of the second year and the second year RMD must be taken by December 31st of the second year. That means that two RMDs are taken in the same year. Both are taxable resulting in additional income and taxes during the second year. The following example illustrates:

Example 1. Jason owns a traditional IRA. Jason turned 73 years old on March 10, 2024. That means that Jason’s first RMD year is 2024. Jason can take his first RMD anytime during 2024, including the months before his birthday (January and February). He can take his first RMD between January 1 and March 31, 2025. However, if Jason delays his first RMD until early 2025, he will have to take two RMDs in 2025, and both will be taxable in 2025. All future RMDs must be taken by December 31.

What Happens if the Traditional IRA Owner Dies During Their First Year RMD But Before Their RBD

If a traditional IRA owner dies during their first year RMD and before their RBD, there is no RMD for the year of death. This is true even if the traditional IRA owner was over age 73 at the time of death. In Example 1, if Jason, who became age 73 in March 2024, were to pass away in March 2025, there is no RMD for 2024 or 2025 because he died before April 1, 2025.

Employer-Sponsored Retirement Plan Exceptions

There are no exceptions to the RMD rules for traditional IRA accounts, including traditional SEP and SIMPLE IRAs. The RBD is always April 1st of the year the IRA owner becomes age 73. But there are exceptions to RMDs on employer-sponsored qualified retirement plans.

The RBD for participants in qualified retirement plans – this includes 401(k), 403(b), 457(b) retirement plans and the Thrift Savings Plan – is the same April 1st following the year a participant becomes 73 unless the plan participant qualifies for an exception. If the plan participant is still working for the company sponsoring the retirement plan, or still in federal service with respect to the TSP, then the participant can delay the RBD to April 1st following the year the participant retires or leaves the employer, or retires from federal service for the TSP. The final year of employment will act in the same manner as the standard first RMD year. That is, the year the participant turns age 73.

This is called the “still working” exception to RBD, but the exception applies to RMDs only from employer-sponsored retirement plans such as the TSP. The exception also does not apply if the individual is not currently working for the company. The following example illustrates:

Example 2. Patricia is a federal employee and will become 73 in August 2024. Patricia owns a traditional IRA and contributes to the TSP. Patricia’s RBD for her traditional IRA is April 1, 2025. She must take her first RMD from her traditional IRA by that date. On the other hand, since the TSP offers the “still working” exception, Patricia can delay taking RMDs from the TSP until she retires from federal service. Particia’s TSP RBD will be April 1st of the year after she retires.

With respect to the TSP, the TSP allows TSP participants to direct rollover their traditional IRAs, including SEP IRAs and SIMPLE IRAs, into their traditional TSP account. If a TSP participant who has reached his or her TSP RBD does perform such a direct rollover and the participant’s traditional IRA is then included in the traditional TSP account, then no traditional IRA RMD has to be taken. The following example illustrates:

Example 3. Same facts as in Example 2 except that in December Patricia went online to her TSP account and requested a direct rollover of her entire traditional IRA into her traditional TSP. As of December 31, 2023, Patricia’s traditional IRA balance was $0. Patricia therefore does not have to perform her first year traditional IRA RMD.