Masterdex10 RMD Annuity

Submitted by sandi tompson on Mon, 2022-11-14 23:09

It is time for my RMD. It appears that “Installments for a guaranteed period” 10 year will give me more per year than choosing
“installments for life”. And choosing Monthly payments are better than one annual payment. This is my first RMD and this is NOT A Roth, so I am not sure what this all means.
Installments for a guaranteed period and I choose 10 years. Does this mean after 10 years, I will have received all my annuity? This is ok if that is what it means. I just cant find in my research a clear understanding.

I don’t think I want to mess with “installments for life”. I am a good saver and will just bank what I receive. But does Installments for life, mean I will receive a certain amount until I die? I am 72. How do I actually figure out if I choose this option, when does it run out, or does it not ever? I am confused.

THANK YOU FOR HELPING ME UNDERSTAND WHAT I AM READING. Oh and another option choice they gave me is INSTALLMENTS FOR LIFE WITH A GUARANTEED PERIOD. What is different from Installments for life with a guaranteed period vs installments for a guaranteed period? So confusing. THANK YOU KINDLY



Submitted by ufleming on Tue, 2022-11-15 15:16

 There are two major components in your scenario: the RMD and your annuity. As far the RMD goes, the IRS does not care how the distribution happens as long as it is complete before the deadline. In other words, your RMD amount can be satisfied by using your current annuity OR any other IRA option available to you including an IRA savings account at your local bank/credit union for example. It may benefit you to consult a financial planner that is experienced in annuities to determine if your current annuity still aligns with your needs. At a minimum, they should review: (1) Surrender charges of the annuity (2) Current payout % of the annuitization/income compared to modern options including non-annuities (3) Any riders you have been paying for since you purchased (4) Unique characteristics of your annuity.Now that we have established you may not be married to this annuity, income options are described below. These descriptions can be found in the product guide “Allianz MasterDex 10 PlusSM Annuity” on page 10 of 16 dated Sept 2012.

  •      Interest only – You have the option to receive interest only annuity payments for 10 years. Interest will be paid as earned based on the amount of your annuitization value. After 10 years of interest-only payments, you can take your full annuitization value as a lump-sum payment.
  •      Installments for a guaranteed period – You can choose to receive annuity payments in equal installments for a period from 10 to 30 years.
  •      Installments for life – You have the option to receive annuity payments in equal installments for the rest of your life. Payments end upon your death.
  •      Installments for life with a guaranteed period – You can choose to receive annuity payments in equal installments for the rest of your life. Upon your death, annuity payments will be paid to your beneficiary for the balance of the guaranteed period, the same way as you previously selected.
  •      Installments for a selected amount – You may receive annuity payments in equal installments of an amount that you choose, as long as the payments last for at least 10 years. Payments continue until your annuitization value is gone.
  •    Joint and survivor – You can have equal installments paid until your death, then continue to be paid to your survivor. In this case, you can select 100%, 2/ 3, or ½ of your payment amount to be paid to your survivor until his/her death.

 

Submitted by Alan - IRA critic on Tue, 2022-11-15 23:23

  • There are different RMD rules depending on whether the annuity has been annuitized and the balance surrendered to the insurer, or whether the RMD Regs still treat this account as an “individual account” and the RMDs are calculated from the prior year end balance. The term “installments” may or may not equate to annuitization. Allianz should make it clear how your annual RMD is calculated.
  • If still an “individual account” the IRS has published guidelines for insurers to use in determining the correct prior year end value. Certain fringe benefits may be required to be added to the cash value. These rules are complex and only the insurance company can calculate and inform you what the correct prior year end value is for RMD calculation. No portion of the RMD is eligible for rollover.
  • However, if annuitized there is no prior year end value, and if the annuitization meets a required IRS format (eg life, joint life with beneficiary, etc), the amount you receive will be the RMD for that contract only. If you have other IRAs, you would calculate the RMD for them separately and distribute them separately. There is consensus that in the year you annuitize, you DO have a prior year end value, so you could aggregate the RMD with other iRA accounts in any combination. Subsequent years would require total separation of these accounts.
  • You should receive assurance from Allianz that the distributions you receive will satisfy your RMD for the annuity.
  • Constant evolution of annuity offerings may have left the IRS well behind. IRS Reg 1.401(a)(9)-6 is highly complex, yet still does not clarify several questions.
  • There is also lack of guidance from the IRS regarding application of IRA basis to annuitized IRA accounts. Form 8606 must be filed to recover your basis each year you take a distribution, but Form 8606 calculations require an account balance for all IRA accounts. If you have annuitized there is no longer a prior year end balance for the IRA annuity, therefore I assume taxpayers are improvising in various ways with apparently no IRS resistance to what is being filed. 

Submitted by sandi tompson on Wed, 2022-11-16 02:29

Thank you for taking the time to answer my questions.  I appreciate you so very much and it is very detailed and helpful.If I annuitize, Allianz wrote “after the first year of annuitization payments, all payments will be considered for the required minimum distribution, meaning the required minimum distribution will always be satisfied. ”  My question is, since they state above “….    (after) the first year of payments.  So does that mean my first annuity payment WILL NOT BE SATISFIED FOR RMD?  So, I should make sure to have cash onhand to pay the RMD?Am I misunderstanding somethig there.    Thank you

Submitted by sandi tompson on Wed, 2022-11-16 02:27

Thank you for taking the time to answer my questions.  I appreciate you so very much and it is very detailed and helpful.If I annuitize, Allianz wrote “after the first year of annuitization payments, all payments will be considered for the required minimum distribution, meaning the required minimum distribution will always be satisfied. ”  My question is, since they state above “….    (after) the first year of payments.  So does that mean my first annuity payment WILL NOT BE SATISFIED FOR RMD?  So, I should make sure to have cash onhand to pay the RMD?Am I misunderstanding somethig there.    Thank you!

Submitted by Alan - IRA critic on Wed, 2022-11-16 03:40

  • What they stated agrees with the general consensus. For the first RMD year (2022 I assume), be sure that your total IRA distributions including the payments from the annuity add up to your total RMD for all accounts. In other words, treat the annuitized distributions as if they came from a non annuity account, and subtract the annuity payments from your total RMD and take the balance from other IRA accounts if you have them. Of course, the month your annuity payments start will affect how much must be taken from the other accounts.
  • Also, note that the year you reach 72 has a special RMD rule for that year only. You are allowed to defer all or part of your RMD to as late as 4/1/2023. The more you defer to 2023, the higher your taxable income will be in 2023 because you also have to complete your 2023 RMD in 2023, when the annuity payments will satisfy the RMD for the annuity, and the rest of your RMD must be taken from your other IRAs.

Submitted by sandi tompson on Wed, 2022-11-16 19:01

Thank you!

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