rollover od an annuitized annuity

Submitted by Dan Hackett on Wed, 2014-05-14 15:34

My question is can an annuity that was established as an IRA be annuitized and then the payout each year be rolled over to another IRA under the 60 day rollover rule? Thanks for your help!



Submitted by Alan - IRA critic on Wed, 2014-05-14 16:18

  • An IRA annuity can be annuitized, but any rollovers or transfers of the payments might run afoul of the IRS RMD requirements. Since the IRS Regs are incomplete when it comes to annuitization in forms other than life or joint life annuities, it is recommended that annuities either be for life or for a term that expires before the year the IRA owner reaches age 70.5. A term annuity that ends before 70.5 can be set up to directly transfer the payout to another IRA. SInce indirect rollovers will be limited to just one per year for all IRA accounts, doing indirect rollovers is not possible unless the annuity is set up for just a single annual payment at least 366 days apart.
  • If a life annuity begins prior to 70.5, the date of the first distribution becomes the required beginning date for that account. Since the payments are then RMDs, they cannot be rolled over. The payments satisfy the RMD for the annuity only and any other IRAs must satisfy their own RMDs separately EXCEPT in the first year where both accounts had a prior year end balance.
  • As indicated above, I would avoid starting an annuity for a limited term (eg 10 years) that begins prior to 70.5 and ends after 70.5 unless you plan to treat the entire payout as an RMD to be safe.

 

Submitted by Dan Hackett on Thu, 2014-05-15 16:52

Per your second bullet point – the indirect rollover will be one per 366 calander days, with that said is it possible to 5 yr annuitize and have that one payment per year be rolled over under the 60 day rule?  I know this does not make much sense but the current company death benefit is $300,000 lower then the account value and we want to take advantage of the full amount.  If we try to direct transfer, the dollar amount will be the same as the lower death benefit. I have nver seen a contract 10 years old that still has a 36% surrender charge!!  As well as that charge still carried over at the death of the spouse.  Its unbeleivable      

Submitted by Alan - IRA critic on Thu, 2014-05-15 17:43

If a 5 to 9 year annuity will mature before the year the owner reaches 70.5, the payouts could all be rolled over. But under the new rollover restrictions starting next year, you can only do one such rollover in a 12 month period for ALL your IRA account. The 12 month period is measured from the date of distribution, not the date of the rollover. Therefore, if the company will offer just one annual distribution, the distribution in year one can be any date, in year two at least 366 days later etc etc, or if the insurer sets this up in specific months, the first distribution could be in August, then Sept, Oct, Nov and final distribution in Dec. That would provide the time required between distributions to make then eligible for rollover.

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