Using annuity to avoid RMD?

Submitted by Philip Detlefs on Tue, 2015-04-21 17:14

I received an email from one of my clients that read:

I was reading the April AARP Bulletin and on page 16 it made the following statement. “Workers can transfer up to $125,000 from IRA’s and 401(k)s to buy an annuity, without having this money included in mandatory withdrawals after age 70 1/2”. The article was “10 steps to achieve Your Retirement Goals”. Can you research this statement.

I am not sure what they are talking about in this article. Does this make any sense?
Thanks!



Submitted by Alan - IRA critic on Tue, 2015-04-21 18:08

  • This is a deferred life annuity called a  QLAC, and the IRS Regs are here:  https://s3.amazonaws.com/public-inspection.federalregister.gov/2014-15524.pdf
  • The premium for the QLAC IRA is removed from the total IRA year end balance for purposes of determining RMDs, but the QLAC must begin payouts no later than age 85. Therefore, taxable income from RMDs will be reduced until the QLAC payments begin, and after that they are increased at a time when the RMDs on the other IRA assets are also increasing.

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