RMD figured on actuarial present value which is greater than Account Value
I just want to let you know, I really appreciate your direction on Retirement account related issues. I would be lost without you 🙂
I have a client who is about 76 yrs old. He has an IRA in an annuity. The death benefit is much greater than the account value. I believe his RMD is figured on the account value and the death benefit. Unfortunately, the RMD is greater than the account value. He is going to have to close the contract, in order to take his RMD, although it’s not going to equal to total RMD. The annuity company says they generate a 5498, which displays RMD and the actuarial present value. How will the IRS look at this? He is not going to fulfill his RMD, will they know why. The client doesn’t have any other IRA’s. Thanks…
Permalink Submitted by Alan - IRA critic on Fri, 2014-05-23 20:36
Thank you Julie. It seems very odd that for a 76 year old the actuarial present value could be so high that the RMD could not be satisfied with the nominal cash value balance. Client should request that the calculation be recheched and also a copy of the calculation worksheet, and though it will be very difficult to understand due to the complexity, perhaps an error will be revealed. If the calculation is correct, the penalty for RMD shortfall can be waived by filing Form 5329 and explaining the situation by including a copy of the calculation or other equivalent explanation from the insurer.