Non-Annuitized Annuity RMD
I have a client who is being shown a variable annuity for his IRA that has a guaranteed 7% return for 10 years on the LifeBenefit Value, and after the 10 year period he can begin taking 5% withdrawals based on the higher of the LifeBenefit or actual cash value of the account. These payments would not be annuitized, but non-annuitized withdrawals. The client is currently 55 years old, so after 5 years of the regular 5% withdrawals, he would have to begin taking RMDs. This isn’t a problem in earlier years because the RMD will be lower than the 5%. Later, however, the RMD will be higher than the 5%. The broker who is showing my client this annuity (ING GoldenSelect Access) tells him that the annuity can be lumped with his other IRAs from an RMD standpoint, and he can take the RMD for the annuity out of his other IRAs. I cannot find anything in writing which confirms or denies this. I know not all retirement vehicles can be lumped together for this purpose. Can he take the RMD from another IRA? Thanks!
Jennifer Luzzatto
Permalink Submitted by mk foss on Wed, 2009-04-15 16:28
All IRAs are considered as one for RMD purposes. It is possible to take an RMD from one IRA based on the market value of another. You can’t lump IRAs with 403b plans, although someone with more than one 403b can take the RMD from any or all. Qualified plans, 401ks, Keoghs etc cannot be combined for RMD purposes.
Permalink Submitted by Alan Spross on Wed, 2009-04-15 18:31
Hopefully, he is in a position where he does not need distributions before age 59.5, because the IRS has not clearly ruled on what account value should apply for a 72t plan from an annuity with a set of complex fringe benefits accruing in the future, whereas the current surrender value would be far less. More than likely, a non surrender cash value would be reasonable, but the problem is no one can read the IRS’ mind on this. The point is, if he needs distributions prior to 59.5, he should plan to use other IRAs for the 72t plan.
Permalink Submitted by Al Fry on Wed, 2009-04-15 19:40
I do not know about the ING annuity, however MOST of these living benefits are RMD-friendly. In other words, if the RMD exceeds the 5% (normally at age 79), it will not erode the guarantee. Of couse market fluctuations can affect the age at which that could happen.