RMD with Immediate Annuity & Brokerage Account
I have a client with 2 IRA’s and will be 70 1/2. One IRA is set up as an immediate annuity paying out over 10 yr which started in 2013. The second IRA is a brokerage account with mutual Funds. When we calculate the RMD how do we factor in the annuity. Do we have to get the Present Value of the annuity and add it to the brokerage account year end balance and calculate the RMD. Or does the annuity and brokerage account have there own identity whereby the RMD for the annuity is complete due to the fixed annual payments. And we calculate the RMD on the brokerage account separately.
Permalink Submitted by Alan - IRA critic on Tue, 2016-03-29 22:45
Unfortuneately, there is no clear IRS guidance regarding an annuitized IRA for a period certain less than life expectancy when the period incorporates the age 70.5 year. The IRS Regs are consumed with limiting period certains that exceed individual or joint life expectancy. The problem is determining whether these annuity payments are considered RMDs eligible for rollover or not, and whether the date of the first annuity payment was considered the required beginning date due to annuitization as stated in the Regs for life annuities. Any amounts deemed to be RMDs are generally considered to apply only to the annuitized IRA account and other IRA accounts would have to distribute their calculated RMD amount separately. There is no suggestion anywhere in the IRS Regs that a present value calculation on an annuity cash flow applies, although I have heard that some life insurers may be using this method. It would therefore be safer to separate the two accounts for RMD purposes, and not roll over any of the annuity payments.