IRA Annuitization
I have a client with 2 IRAs. One with investments for 20,000 and one with an AXA annuity for 207,000.
He is required to take a 1525 distribution from his small annuity for 2017 and a 24,600 distribution from his
IRA with the AXA annuity. He has already taken 3000 from smaller account which satisfies his RMD.
That is in excess of amount required.
Client will annuitize his IRA AXA annuity and begin taking payments in April. My question is does he have to satisfy his 24,600 2017 distribution?
AXA gives him 2 options:
No I am taking my RMD withdrawal from another traditional IRA source
or
Yes, I direct AXA Equitable to take my last account based RMD withdrawal from my Accumulator Series contract
prior to converting it to the GMIB payout annuity contract. I understand that this may reduce the payments provided by GMIB.
Your article “What Happens to My RMD if I Annuitize my IRA Annuity?” states that “the annuitized amount that comes out of the IRA each year will satisfy your RMD obligation.”
I interpret this to mean that the client does not have to separately pay his 24,600 RMD for 2017 if he annuitizes
the only investment in his account, his annuity.
Please reply.
Permalink Submitted by Josette Rathbun on Wed, 2017-03-08 21:51
Please respond to my request asap.Thank you
Permalink Submitted by Alan - IRA critic on Wed, 2017-03-08 22:13
Starting in 2018, the annuity payout will satisfy the RMD for the annuity contract only. The other IRA must separately distribute the RMD based on it’s 12/31/2017 balance. However, since both accounts had a year end 2016 balance, the 2017 RMD can be aggregated, which means the total 2017 RMD can be taken in any combination from the two accounts. Once the monthly annuity payments are known, it will be clear how much of the total RMD will be met from just those payments. Any shortfall can then be taken from the non annuity IRA account. It sounds like it will be better to select the first option, since the second option appears to result in total taxable distributions for 2017 far exceeding the combined RMD for both accounts. It should also be determined exactly what his RMD would be from the annuity disregarding the annuitization because the IRS requires the annuity cash value to be increased for certain fringe benefits. Only the insurance company can provide this figure, but perhaps that is what the 24,600 represents.
Permalink Submitted by [email protected] on Thu, 2017-03-09 14:13
Are you sure GMIB payments is the same as annuitizing a contract? -m