convert IRA to a SPIA – RMD
My client has an annuity inside an IRA. He will become 70 1/2 this year (2017). For various reasons, he wants to delay the RMD to April 1 of 2018. However, he intends to convert the annuity to a SPIA – payable for life with a 10-year certain. Ordinarily, I believe that the SPIA payments would be considered as meeting the RMD requirements, but in this case would he also be required to take a separate, additional RMD for 2017?
Permalink Submitted by Alan - IRA critic on Mon, 2017-06-26 22:01
Yes, because at this point in 2017 the SPIA distributions will fall short of the 2017 RMD determined as an individual account using the 12/31/2016 balance. While the remainder of the 2017 RMD could normally deferred to 4/1/2018, this is not possible after annuitization. As a result, the balance needed to complete the 2017 RMD will have to be distributed before the annuity payments begin. If the SPIA was not purchased until 2018, then the 2017 RMD could be pushed into 2018. This assumes no other TIRA accounts which could satisfy the 2017 RMD under the IRA aggregation rules.