When Do RMDs Start? Under Secure 2.0, It Depends

What You Need to Know

At first glance, the changes to the rules regarding the required beginning date (RBD) might seem simple.
But now, there’s a system where different clients must begin taking retirement plan distributions at different ages.
This is a challenge for advisors who need to provide correct advice for clients approaching their RBD.

The Setting Every Community Up for Retirement Enhancement (Secure) 2.0 Act once again changed the rules governing the required beginning date (RBD) — the date at which retirement savers must begin taking distributions from traditional retirement plans.

On their face, the changes seem relatively simple. In reality, the combination of the original Secure Act and Secure Act 2.0 created a system where different clients must begin taking retirement plan distributions at different ages.

This, in turn, creates a challenge for advisors who, under prior law, knew that each client was subject to the same required beginning date. Therefore, it becomes important for advisors to familiarize themselves with the new changes to make sure they’re providing correct advice for clients approaching their RBD now and in the coming years.

Secure 2.0 RMD Changes

Taxpayers who contribute pretax dollars to 401(k)s, 403(b)s and IRAs are not entitled to reap the benefits of tax deferral forever. The law requires them to begin depleting their account funds — and paying the associated taxes — once they reach retirement age.

What constitutes “retirement age,” of course, varies from client to client. The law, however, contains a date at which most taxpayers must begin taking distributions regardless of whether they have actually retired.

The original Secure Act increased the required beginning date (RBD), or the age at which taxpayers must begin taking distributions from traditional retirement accounts, from age 70.5 to age 72. Under the original Secure Act, the account owner must take an initial distribution by April 1 of the year following the year they reach 72.

the Secure 2.0 Act will gradually increase the age at which required minimum distributions (RMDs) from traditional retirement accounts must begin from 72 in 2022 to 73 in 2023 and up to age 75 by 2033. The change applies to company plans, IRAs, SEP IRAs and SIMPLE IRAs (but not to Roth IRAs, which are not subject to a lifetime RMD rule).

It’s important to note that the Secure Act 2.0 does not provide retroactive relief. Taxpayers who reach age 72 in 2023 will continue to be subject to the existing rules — meaning that they will be required to take their first RMD by April 1, 2024, and their second distribution by Dec. 31, 2024.