Partial payment of RMD through an insurance company annuity

Submitted by John Cranston on Mon, 2020-01-13 21:24

I currently receive a monthly payment through an annuity I purchased within my Ira January 30, 2019. DOES THIS AMOUNT COUNT TOWARDS MEETIN MY RMD FOR 2019. I am also receiving money from the withdraw of fund from my Ira account.



Submitted by Alan - IRA critic on Mon, 2020-01-13 23:03

Is this an SPIA annuity in it’s own IRA account? Is it a life or joint life annuity with your beneficiary? What was your age on the date of the first annuity monthly distribution?

Submitted by John Cranston on Tue, 2020-01-14 22:29

This is not a separate Ira account.  I have a rollover Ira with fidelity and used money from that Ira to purchase an annuity from ny life With my beneficiary.  I was 72 years 3 months old when I received my first monthly distribution in feb 2019.

Submitted by Alan - IRA critic on Tue, 2020-01-14 23:49

  • Usually the IRA annuity is in it’s own IRA account. If yours is in the same IRA account with non annuity assets, the custodian will have to advise you what the RMD is for that account. I would get it in writing should the IRS ever question if you have met the RMD for that account. The RMD might still be the same as if the annuity was in a separate IRA, meaning that the value of the non annuity portion would be used to calculate the RMD as usual, while the annuity payout automatically meets the RMD for the annuity portion that does not have an account balance. The good news is that even if the IRS disagrees with the amount you received in some year, you can probably get the penalty waived by filing Form 5329. 
  • For your 2019 RMD only, the 12/31/2018 value pre dated the annuity, so the general consensus is that the RMD for 2019 would be calculated normally, and the amount of the annuity payouts would be added up and applied to the total RMD. Starting 2020, there is no longer an account balance for the annuity (Other than an imputed balance that the IRS has never agreed to recognize), so the RMD would be whatever the annuity payments are for the annuity portion and the rest of the RMD can be calculated in the usual manner. 

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