Immediate Annuity Payout satisfy RMD on other IRA assets?
If an IRA owner who is subject to RMD’s purchases an Immediate Annuity with a portion of the IRA assets, the payout from the Immediate Annuity portion will be greater than the RMD on that portion. Does the excess payout from the Immediate Annuity portion cover the RMD for the non-immediate annuity portion?
Permalink Submitted by Alan Spross on Fri, 2008-06-20 20:53
It does in the year of annuitization because there was a prior year end balance for all the assets. However, after that there is no way to establish a year end balance for the annuity that the IRS has indicated they will recognize, so each will have to stand on their own from that point on. It is best to have the annuity in a separate IRA annuity contract at that point to avoid further confusion.
The IRS had a good opportunity to clarify this issue when they released the RMD requirements for DB plans and annuities in 2004 — but they did not address this issue specifically.