RMD Traditional IRA calculation
Client has an IRA annuity that she is annuitizing (taking payments annually for a 10 year period). Her value on 12/31/2008 was $132,500. Her payments are $15,983 eleveen times. She did not get a value for 12/31/2009 from the company. Is this because this type of payout is no longer considered for her total IRA RMD as it is a stand alone situation? Don’t know if I am saying this correctly but does this payout count as just the RMD for that piece of her IRA portfolio. Please advise
Permalink Submitted by Alan Spross on Fri, 2010-03-19 21:28
Yes, it satisfies only the RMD for the annuity portion since there is no longer an account value for which to calculate the RMDs any other way. Usually, this situation appears with a life or joint life annuity and even with them, the initial distributions are larger than what a typical RMD would be. With a 10 year annuity, this result is further increased to around 3 times what it otherwise would be for an IRA owner in early 70s.
Client’s other IRA accounts will have RMDs that are not affected by the large annuity RMD except in the first year of the annuity. The other RMDs can be offset in the first year because there was an account balance 12/31/08. But since there were no 2009 RMDs, the above first year situation does not apply. For 2010 and beyond, the other IRAs will have to generate their own RMD and the annuity payout will satisfy the annuity RMD. Obviously, these need to be in separate IRA accounts.