RMD, immediate annuities, remaining qualified accounts

Submitted by Robert Leibman on Tue, 2014-05-13 18:43

I am not sure whether this is correct forum, but the only choice given. I am 72 and just retired from my FT job in mid January. I have paid RMD on one IRA account and two small 403B accounts for two years as they were not directly connected to my FT job. I have several questions going forward. I must now begin paying RMD on the rest of my qualified monies – all 403B – some “retirement” from the job, the rest TSA.
Since this is the first year on all of that money, do I have the choice to pay it up through April of next year as was true in the year I turned 70.5 (for the money then affected) or must it all be taken and paid in 2014. If the former, can I break it up and do some in 2014, and the rest in first months of 2015. (Of course, I would also have to meet my 2015 obligations that year.)
Now, I have purchased $480,000 in two immediate annuities which will begin paying me a total of about $3600/mo in a few days. Thus I will be payed about $25000 during 2014. I am fairly certain that for the rest of my life, the annual payments are accepted by the govet. in lieu of RMD. In 2014, I seem to be responsible for RMD on the $480,000 which was part of my 403B at the end of 2013. Seems unfair, but I gather that is true? (If not, great.) I have about $550,000 still in several 403B accounts – most of it in TSA accounts, about $90000 in “retirement” account. Hence, my RMD on this money should be almost $22,000. Is there anything I can do to lower what seems to be a total RMD of about $41,000 (based on total money -including that which I later used to buy the annuities) in these accounts at the end of 2013) in addition to the annuity payouts of about $25000. I thought read something elsewhere in this forum about using the RMD on the money I paid for the annuities to cover the other RMD I owe, but as I think about it that makes no sense.
So if there is anything I can do – or should be checking out – I would be interested in knowing.



Submitted by Alan - IRA critic on Tue, 2014-05-13 19:44

  • I am not clear on exactly which accounts are connected with your recent retirement, but the plans sponsored by that employer have been exempt from RMDs because you were still working. Since you retired from that job in 2014, 2014 will be an RMD distribution year but that RMD can be deferred to as late as 4/1/2015 which is your required beginning date for those plans. And you can split your 2014 RMD based on the 12/31/2013 balance between 2014 and 2015 before 4/1 in any combination you wish. If you defer all of the 2014 RMD until 2015 you will have 2 RMDs to take in 2015 and higher taxable income.
  • Also not clear which accounts you annuitized (IRA? 403b?), but in all years after the year of annuitization the payment will be your RMD from that account and cannot be aggregated with any other accounts. For the year of annuiziation only, you had a prior year end balance, so could aggregate your RMD with other RMDs (403b RMDs can be aggregated with other 403b accounts, but with no other account types.
  • You are dealing with a complex combination of deferral of first year RMD on accounts from your recent retirement, annuitization RMDs in year of annuitization and annuitization RMDs in years after the year of annuitization. But there is no free lunch in that any deferral you elect of the first year RMDs will just result in higher taxable RMDs in the following year. And if you get SS benefits, equalizing your taxable income does not always result in the lowest total taxes over 2 years.
  • I could narrow this done better if I understood how many accounts you had from your most recent employer that you have not yet taken RMDs on, and whether any of these are now annuitized, or if you annuitized some of the other accounts for which RMDs started when you hit 70.5. Do you have any IRAs at all, or are all the accounts 403b or defined benefit pension?
  • Annuitizing a retirement account will tend to even your RMDs over your lifetime, making the distributions higher in the beginning and perhaps somewhere around 80 turning lower than what your RMDs would have been had you not annuitized.

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