Roth IRA account to fund annuity

Submitted by Julia zhai on Thu, 2014-01-09 13:56

HI,

I am thinking of using my Roth IRA account to fund annuity contract. I assume there will be no tax consequences when I withdraw the money in my retirement. Am I correct on that? Is there anything I need to be aware of using this strategy to fund a life time income without having to worry about the tax?

Thanks,
Julia



Submitted by Alan - IRA critic on Thu, 2014-01-09 17:21

This is not a problem. If you roll over or transfer Roth funds to a Roth IRA Annuity, the tax rules for Roth Annuity distributions follow Roth IRA rules, not annuity rules. If your Roth is qualiflied (5 years and age 59.5), all annuity payments will be tax free. Further, at this time they do not trigger any other taxes either, eg they will not increase taxes on SS benefits. If your Roth is qualified you only need to show the 1099R amount on line 15a of Form 1040, not 15b, and you will not need Form 8606. And you do not need to be concerned with the Roth annuity meeting any RMD requirements since there is NO RMDs for a Roth IRA.

Submitted by Julia zhai on Sat, 2014-01-11 21:49

Thanks so much Alan! But I am not always sure if funding an annuity with Roth is a good idea. There is some merit here for some people to fund annuity with Roth especially those who needs to use the money for goldern years. Don’t you agree?

Submitted by Alan - IRA critic on Sun, 2014-01-12 17:39

Like any life annuity, the merits require that you outlive the mortality expected by the insurance company, and in addition that you don’t need a large sum for some critical need.

Submitted by Julia zhai on Fri, 2014-01-17 15:57

Thanks, Alan! Julia

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