IRA RMD

Submitted by ShipsnGiggles on Thu, 2018-04-12 19:41

T-IRA owner, 81, is subject to a 2018 RMD in excess of $62,000 (based on his 12/31/2017 account value)
Unfurnately in the time since the year end fair market value – his account has lost more than 80% – Although he does still have enough left to cover the RMD.
This is his only IRA

question(s)
Can he move the IRA into an immediate annuity and bypass the $62,000 RMD? Could the annuity payout cover the 2018 RMD instead? I dont think this is possible – looking for ways to reduce or eliminate the large RMD for 2018

The IRA was orignally funded via a 401(k) rollover – all pre-tax dollars. Now that that account is “under water” could he convert to a Roth – tax free? With the understanding the RMD must be satisfied prior to the conversion. Although this would not aovid the 2018 RMD it would avoivd future minimum distribuitons.

Thank you



Submitted by Alan - IRA critic on Fri, 2018-04-13 00:21

  • Purchase of the annuity will not change the 2018 RMD and the annuity payments would only meet a fraction of the RMD.  It is not clear what the IRS would do if the owner annuitized the entire balance without first taking most of the RMD out before annuitizing. In that case, there would be no way to satisfy the RMD because the insurance company would have the remaining balance.
  • He could take the 2018 RMD and then convert the rest, but that would just increase his tax bill. Since his future tax rates have been lowered due to the loss of IRA assets, that makes a conversion less valuable since he would end up paying more for the conversion than on the much smaller future RMDs.
  • There is no penalty if his balance drops below his RMD, but annuitizing to reduce his balance before meeting the RMD is different than an investment loss.

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