QUalified Annuities with Lifetime income and RMDs
Person owns an Annuiy with lifetime income, even when the account value goes to $0. The also have a large IRA account. Will the income generated by the annuity after the account value is depleted count towards the amount of RMD, which is now based on only the IRA, for that year? Is there an acutarial value of the annuity after the account value is $0 that impacts their total value for RMD calculation purposes?
Thanks
Permalink Submitted by Alan - IRA critic on Fri, 2023-11-03 22:26
Assuming this is an IRA annuity, the insurance company has 3 options for determining the prior year end value of the annuity for RMD purposes. The company will have to disclose the RMD in January of the RMD year, and the person can then satisfy the RMD in any combination between the annuity IRA and other owned IRA accounts.
Permalink Submitted by [email protected] on Mon, 2023-11-06 12:13
Sorry, I didn’t state the question properly. The IRA Annuity has a lifetime income rider. When the account value of the annuity goes to $0, the income continues over the owners/annuitants lifetime. Does this income, after AV=$0, still count towards the RMD owed per year based on the aggregate total of all Trad IRA’s? Thanks
Permalink Submitted by Alan - IRA critic on Mon, 2023-11-06 16:01
Yes, the income reported on the 1099R is credited toward the total RMD for all IRAs, but the insurance company will have to provide the prior year end balance on which the annuity RMD is based. If the AV is 0, the imputed year end balance would include the value of the rider.
Permalink Submitted by [email protected] on Mon, 2023-11-06 16:19
Thanks. Now if I only knew the secretr formula for Acturial Present Value, I could solve a lot of things.
Permalink Submitted by Alan - IRA critic on Mon, 2023-11-06 17:19
You would have to know which of the 3 options the company uses, but they should tell you what the value is, or at least what the RMD is for the annuity IRA. If they tell you the RMD, you can multiply it by your RMD divisor to determine the imputed account value they used.