Annuitization and RMD
Client wants to annuitize one of her IRAs to give her an income base. It’s my understanding that a life only annuity would satisfy her RMD, but what if she annuitizes with a 10-year period certain. The annual payout will be lower, but still well in excess of the RMD for the first year. Does the period certain create a problem?
Permalink Submitted by Alan Spross on Mon, 2008-03-10 22:30
It could, but the insurance companies seem to know the annuity RMD rules quite well. Here is the rule from the 2004 IRS guidelines , and note that the starting date for the annuity vrs the RBD must be considered:
A–3. (a) Distributions commencing
during the employee’s life. The period
certain for any annuity distributions commencing
during the life of the employee
with an annuity starting date on or after
the employee’s required beginning date
generally is not permitted to exceed the
applicable distribution period for the employee
(determined in accordance with
the Uniform Lifetime Table in A–2 of
§1.401(a)(9)–9) for the calendar year that
contains the annuity starting date. See
A–10 of this section for the rule for annuity
payments with an annuity starting
date before the required beginning date.
However, if the employee’s sole beneficiary
is the employee’s spouse, the period
certain is permitted to be as long as the
joint life and last survivor expectancy of
the employee and the employee’s spouse,
if longer than the applicable distribution
period for the employee, provided the period
certain is not provided in conjunction
with a life annuity under A–1(b) of this
section.
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