RMD question
Recipient > 70.5 and taking min.distr.(IRA)–08′ calculated on 12/31/07 IRA balances–08′, invests in immediate annuity and takes 1st yr. distr. from annuity(happens to exceed 08′ IRA RMD)–does this meet RMD?
Do annuities count in RMD whatsoever and/or whensoever?
Thanx
Permalink Submitted by Alan Spross on Tue, 2008-07-22 20:10
An immediate annuity in an IRA will satisfy the RMD requirement for each year for the annuity IRA only. It will always start out higher but eventually be lower than a non annuitized IRA RMD because it is essentially a level amount for life or joint life and does not escalate like the Uniform Table in Pub 590, except possibly for a COLA.
The confusion occurs when there are other IRA accounts that will continue to have an account balance and could otherwise be aggregated in various combinations each year to satisfy the RMD. If this is the case, since both the annuitized amount and the others have a prior year account balance in the first year, the annuity RMD can result in reducing the RMD due from the other IRAs. However, after the first year the annuity will have to stand on it’s own and so will the other IRA assets because the annuity will no longer have a 12/31 balance from which the RMD can be calculated.
Permalink Submitted by Al Fry on Wed, 2008-07-23 02:42
As usual, Alan’s answer is right on. And now for the rest of the story: There is at least one company that now has a new “hybrid” annuitization option which provides income for one’s lifetime, with full access to the account balance during the “access period”, which can be as long as to age 100 for IRAs. During this “access period” the payments are actually withdrawals which can be used as offsets to RMDs on other IRAs, if the w/ds are higher than required for the annuity.