Another question about using annuitization in an IRA
I am aware that once an IRA annuity has been annuitized a residual value is no longer reported by the issuing insurance company thereby making the calculation of an RMD impossible in subsequent years. However, if an immediate annuity is purchased with only a portion of the funds inside of a self-directed IRA (i.e. brokerage account), wouldn’t the amount of the annuity payment count towards the RMD since the distribution is from the same IRA?
Permalink Submitted by Alan - IRA critic on Fri, 2013-01-04 01:56
If an immediate annuity is purchased, it should be done in a separate contract, an IRA annuity contract. That contract would cease to have a year end value, but the other funds that were not annuitized from the original IRA account would continue to have a year end balance that would be used to calculate a standard RMD on that portion. Note that is the year of annuitization, there WAS a prior year end balance and for that first year only, the annuity payment could be subtracted from the total RMD to determine the remaining RMD amount from the non annuitized accounts.