RMD Calculation for IRA Annuity and Non-annuity IRA
Client is required to take RMD this year. He has a $100k IRA Annuity, RMD of $4k. Also has a $200k non-annuity IRA, RMD of $8k.
The client is going to start the income benefits on the annuity, which will give him $6k/year.
Will the additional $2k of distributions from the annuity reduce the non-annuity IRA RMD to $6k, or will he still have to take out $8k from the non-annuity IRA?
Permalink Submitted by Alan - IRA critic on Wed, 2022-03-16 02:32
An IRA annuity is treated like a standard IRA until it is annuitized, and the income benefit is not annuitization. Therefore, the account still has an account balance at year end from which the RMD for the annuity is calculated with possible value increase imputed based on the combination of fringe benefits included. The insurance company must provide the IRA annuity owner with the RMD for the IRA annuity. Distributions from the IRA annuity count toward the RMD and can be aggregated with distributions from the non annuity IRA in determining when the total RMD has been completed. Therefore, it is likely that the additional distributions may reduce the RMD that must be taken from the non annuity IRA. Once the IRA annuity is actually annuitized, then the annuity payout satisfies the RMD for the annuity IRA only, and the other IRA must separately satisfy it’s standard RMD. In this situation, the RMD aggregation rules no longer apply.