IRA Transfer after 70 1/2

Submitted by Jonathan Sard on Wed, 2019-01-09 19:49

A 79 year old client has $750,000 in his IRA at TD Ameritrade. He wants to purchase an immediate annuity with $250,000 with XYZ Insurance Company to get guaranteed income. Can he do a DIRECT TRANSFER of $250,000 from his $750,000 IRA directly into the IRA immediate annuity before taking his 2019 RMD? Or, can he wait to take his 2019 RMD until later in the year?



Submitted by Alan - IRA critic on Wed, 2019-01-09 20:38

  • A direct transfer can be done at anytime without regard to the RMD status because a transfer is not a distribution. His 2019 RMD amount will not change, but all IRA SPIA distributions will count toward the RMD. Therefore, he needs to know what the total expected annuity distributions will be this year and can then subtract that amount from the total RMD to determine how much must be distributed from the remaining IRA before year end.
  • Starting in 2020, the annuity distribution will satisfy the RMD for the annuity only, so the two accounts will be treated separately with respect to RMDs. I assume the insurance company is aware of the IRS RMD regulations with respect to the structure of the annuity and the annuity will comply.
  • If he has any IRA basis (Form 8606), he will have to improvise to determine future taxable amounts since the IRA annuity will no longer have a year end value from which to determine basis recovery.

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