annuitized Traditional IRA annuity
I am 64 years old and decided to annuitize my traditional IRA annuity account last year. The yearly payments will be for 20 years period certain. Last year my payment was sent to me and I mailed it within 60 days to a brokerage company where I have another traditional IRA account. This year I have it changed whereby my payment will be sent directly to the brokerage company. I don’t work and only have my social security as income. Is there any reason either of these methods of the transfers would not be acceptable as rollovers?
Permalink Submitted by Alan - IRA critic on Thu, 2021-06-03 00:45
Yes, a big reason. If you annuitize an IRA over a period that includes your IRA RBD, the payments you receive must be treated as RMDs even before age 72. SInce RMDs are never eligible for rollover, any amount reported as a rollover results in an excess IRA contribution that must be removed with earnings. Starting ASAP you should have the payments sent to a taxable brokerage account or your bank account.
While the IRS Regs in 1.401(a)(9)-6 are only clear for life or joint life annuities, it is likely that if you had annuitized at 63 for 8 years and the payments stopped prior to your age 72, the payments would not have crossed the first RMD distribution year. As such those distributions could have been rolled over.
It is unfortunate the insurance companies do not explain RMD ramifications to IRA annuity owners before they annuitize. Maybe some of them are unaware of them. The IRS Reg is highly complex.