RMDs and SPIA IRAs?
If someone is receiving payments from a SPIA – thereby having annuitized the IRA assets for income – once they reach 72, if they have other IRA assets, will the SPIA payments count toward the RMDs due on the other IRA assets. I ask because I have read that once IRA assets are annuitized they are not considered for RMD purposes. This comes up because if the other IRA assets are in annuities, there could be penalties or loss of “roll up” opportunities if withdrawals are taken to satisfy RMD requirements.
Permalink Submitted by Alan - IRA critic on Mon, 2021-05-17 19:15
Once an IRA is annuitized for life or joint life with beneficiary, the annual IRA SPIA distributions ARE the RMD for the IRA annuity EVEN if the IRA was annuitized prior to age 72 (or 70.5 previously). As such none of these payments are eligible for rollover.
In another more frequent scenario, the IRA is annuitized after RMDs have started. In this case, because the annuitized account had an actual prior year end balance, the RMD can be aggregated with other non annuitized IRA accounts. But after that initial year, as is the case above the IRA annuity distribution is the RMD for that account and the other accounts must satisfy their RMD separately in the usual manner.
Neither the IRS or the insurance companies writing these annuities clearly explain the entire situtaion to investors. In fact, much of the conclusions stated above were arrived at by consensus of IRA experts since the IRS has never clarified the entire RMD situation, including how to apply IRA basis to annuitized distributions. Some of the rules are in IRS Reg 1.401(a)(9) -6 which mainly deals with RMDs for annuities without mentioning other accounts, aggregation of RMDs, or IRA basis. For example, a 10 year period certain annuity started at age 66 and therefore breaching the RMD start date presents several unclear questions.