IRA Annuity

Submitted by Robert Wright on Mon, 2016-10-31 17:06

I’m 45 years old.
I own an TIRA annuity.

The insurance company will annuitize my TIRA annuity and give me annual payments on 12/1 every year for 15 years. The annual check will be payable to me.

I want to annuitize the TIRA annuity because the payments I will receive over 15 years (assuming I live 15 years) will be cumulatively much greater than the current value of the TIRA annuity if I just cash out the annuity and did a custodian-to-custodian transfer of the annuity’s current cash value.

The timing I see is this:

Day 0: 12/1 of year 1
Day 365: 11/30 of year 1

Day 366: 12/1 of year 2

Can I rollover this annual IRA payment into a different TIRA and avoid the once-per-year rollover restriction if the check is dated 12/1 every year?



Submitted by Alan - IRA critic on Mon, 2016-10-31 19:13

What is your age, as it affects how RMDs must be addressed? Do you have another non annuity IRA now? As for rollovers, you can only roll over amounts that are in excess of your RMD, so if the entire annual payment is considered to be RMD you cannot roll over any of it.

Submitted by Robert Wright on Mon, 2016-10-31 20:34

I’m 45 years old.So these annual annuity payment s will not be RMD.Yes. I have another non annuity TIRA right now.

Submitted by Alan - IRA critic on Mon, 2016-10-31 21:17

OK, each of these payments can be rolled over as there are no RMDs with this form of annuity. (If you annuitized into a life or joint life annuity, the payments would have been deemed RMDs even at 45 with no amount eligible for rollover.)  But you still have the one rollover rule per 12 months, therefore you will have to arrange for a direct trustee transfer of these payments rather than doing 60 day rollovers. For the direct transfer, the check cannot be sent to you personally, rather the IRA annuity custodian will have to transfer directly to your other IRA account.

Submitted by Robert Wright on Tue, 2016-11-01 10:30

So if the first annual annuity payment is made on 12/1/16 and I rolled this over to my existing TIRA, on what date in 2017 could I make another rollover?

Submitted by Alan - IRA critic on Tue, 2016-11-01 16:46

  • The 12 month period ends on the day of receipt of your 2017 payment. “Ends on” usually means the ending day counts in the period. While not totally clear, in order for the 12 month period not to total more than 12 months, the period should start on the day after you received the 2016 distribution. For example, if you received the distribution on 12/3/2017, counting back 12 months should run back to 12/4/2016, not 12/3/2016.
  • While this means that in theory you should be able to do a 60 day rollover if you received the check on the same date each year, in some of the years a weekend will delay your receipt date by the critical day. The holiday or weekend extension per Sec 7503 only extends deadlines, so would not help here.
  • Your IRA custodian would be more likely to question the rollovers than the IRS because the IRS does not know the dates involved barring an audit. The custodian has a record of your rollover contribution dates, but does not know your receipt date, so most custodians would probably accept the contribution without question. Of course, you have 60 days to complete a rollover, so if you added a couple days each year to the completion of the rollover contribution, your IRA custodian might be less likely to question the receipt date.
  • While the chances of this becoming an issue are slim, they do exist and depend on different people looking at this every year. Why take a chance? Since the 12 month limit now applies to ALL your IRA accounts, doing these 60 day rollovers excludes your option to do one with your other IRA account. You should determine how difficult it would be to do direct transfers. It would remove all the risk, and make your return simpler because you do not have to report transfers on your 1040.

Submitted by Robert Wright on Tue, 2016-11-01 17:03

Thanks Alan.

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