RMD on an annuitized IRA with a twist
From what I can find – besides the first year once an IRA has been annuitized there is no “required” md on that account because there is no FMV in subsequent years. Plus, the distributions are not eligible for rollover or able to count towards RMD amounts for other IRA accounts. Here is my twist, what about balloon SPIA’s? What happens if a 75 yr old takes current years RMD, then annuitizes the rest, let’s say 100K, as balloon with for example $10 a month of precipal a month for 119 payments and at age 85 he gets a balloon payment of $98,810. Could that really happen?????? Without consequences of course.
Permalink Submitted by Alan Spross on Thu, 2011-09-01 23:46
The following link includes the complex IRS Regs for annuity RMDs, but the basic thrust is that the money most come out at least as fast, ie based on life expectancy as it would if an account balance had been maintained by the IRA owner. Clearly, your scenario would not come close to that, nor would an annuitization with a period certain lasting longer than the IRA owner’s life expectancy since that would make the annual distributions too small and the IRS would not collect taxes quickly enough. You will see that there are rules for joint annuitants with a spouse that allow for both lives to be used.
Insurance companies should be in a position to indicate which of the unlimited annuity options that exist meet IRS requirements and which fall short. That assumes that they fully understand these Regs, of course.
Good reading here, if you need help getting to sleep some night 🙂
http://www.irs.gov/pub/irs-irbs/irb04-26.pdf