Annuity to IRA

Submitted by Steven Zonnevylle on Thu, 2022-01-27 20:24

My advisor told me I can start my Annuity and have the monthly payments deposited in a IRA. This way I can convert to a Roth as needed. My question if I do this will I need to take RMD’s on the Annuity deposits in the IRA when I reach 72.



Submitted by Alan - IRA critic on Thu, 2022-01-27 21:45

What type of annuity, an IRA annuity, a qualified employer annuity, or a non qualified annuity?

Submitted by Steven Zonnevylle on Sat, 2022-02-05 17:48

It’s a Total Value Security Benefit Annuity. (a fixed index flexible premium deferred annuity contract, form 5700 (3-12) and ICC12 5700 (3-12)) Not sure but looking at the definition of Non Qualified Annuity I’m thinking that is what it is.  It was purchased with Before Tax dollars 10 years ago from my work 401K. 

Submitted by Alan - IRA critic on Sat, 2022-02-05 20:45

This annuity product can be placed in a qualified annuity, an IRA annuity, or a non qualified annuity, but the product info does not specify the type of account it is currently part of. However, based on the funding 10 years ago and the fact that your advisor states that distributions can be rolled into an IRA, it appears to be qualified annuity and therefore subject to the RMD rules for annuities. Under these rules, if you annuitize a plan for life or joint life, the distributions are treated as RMDs, even prior to age 72, and therefore cannot be rolled over to an IRA or other qualified plan. It is possible to have distributions directly transferred (not distributed to you) to an IRA as that avoids RMD distributions, but I don’t know that many insurance companies will do this. Your advisor or you will have to find out if that arrangement is offered by Security Benefit.
Your annuity has a ton of complex options which are difficult to understand, but you can generally take distributions without annuitizing the contract which would trigger RMDs if distributed to you. If not annuitized you could roll distributions over to an IRA.
Now to your question. If you are able to get annuity distributions directly transferred to an IRA, will the IRA be a standard non annuity IRA (not with an insurance company), a non annuitized IRA annuity, or an annuitized IRA annuity?  If annuitized, the annual distributions are treated as the RMD for the IRA annuity and if not annuitized the IRA annuity is treated like a standard IRA for RMDs except that the year end value may have to be inflated to take into account certain annuity fringe benefits. The insurance company will have to calculate that year end value. 
You may want to stay away from yet more annuities. If you annuitize, there is an opportunity cost for having all your money tied up. The monthly payments are much like social security, but if you suddenly need a lump sum for a large purchase, uncovered medical bills etc, you will not have access to the lump sum.

Submitted by Jerome Lehrman on Wed, 2022-11-23 21:49

Alan: thank you for your long service to IRA forums.  My question to you today is: can distributions from a qualified variable annuity be paid directly into my IRA?I have a joint life GLWB at Fidelity sponsored by Brighthouse (fka MetLife) that is qualified and which my wife and I will elect to start receiving 5% distributions from next year.  I thought that I could receive these distributions directly into my IRA and avoiding triggering taxes, but the Fidelity annuity specialists told me that it could not be done, due to IRS regulations. Is this correct or is there a way to do that?Thanks in advance for your help.Jerry

Submitted by Alan - IRA critic on Fri, 2022-11-25 01:50

Was this annuity funded from an employer pension plan or is it an IRA annuity, and are you RMD age? 

Submitted by Jerome Lehrman on Wed, 2022-11-30 23:46

This annuity was funded from an IRA (I took out funds from my IRA and bought the Brighthouse GLWB annuity through Fidelity).  I am 65, so not RMD age.

Submitted by Alan - IRA critic on Thu, 2022-12-01 01:47

  • Since the funds came from your IRA, I assume that you now have an IRA annuity, but suggest you verify that from your contract. “IRA” should clearly by shown as the holding account for this annuity. If so, you would have paid no taxes on the IRA distribution. It would either have been reported as a rollover or was done as a non reportable direct transfer from an IRA to the IRA annuity contract.
  • Because these distributions do not result from annuitization of the IRA annuity, the payments are not RMDs until you reach 72. As such, they should be eligible for rollover to an IRA under IRS rules, but you are only allowed one such rollover every year. That means that non reportable direct transfers must be arranged between your other IRAs and your IRA annuity insuror. While such an arrangement would be allowable under IRS rules, the insurors generally will not agree to cooperate with such transfers. Sometimes they blame this on IRS rules, but it’s really their decision. The result is that these distributions will be taxable to you. 
  • You should verify with the insuror that the contract is indeed NOT annuitized by this arrangement, and there is no RMD requirement until age 72 or later if the RMD age is again increased by pending legislation.

Submitted by Jerome Lehrman on Thu, 2022-12-01 21:39

Thanks, as always, for your help, Alan

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