Annuities and RMD

[cashflo2u2]

In a few years I will be faced with the RMD requirement. I wondering if one purchased an immediate fixed annuity within the IRA, say with half the IRA funds, and the annuity payment was equal to or greater than the RMD requirement for the entire IRA, would that satisfy the RMD requirement for the entire IRA? Nobody seems to be able to give me a definitive answer on this including VG annuity specialist.

PS: I find that an immediate fixed IRA for about 25% of my portfolio greatly increases the survivability of my remaining portfolio. Not sure why.

 

[FinanceDude]

In a few years I will be faced with the RMD requirement. I wondering if one purchased an immediate fixed annuity within the IRA, say with half the IRA funds, and the annuity payment was equal to or greater than the RMD requirement for the entire IRA, would that satisfy the RMD requirement for the entire IRA? Nobody seems to be able to give me a definitive answer on this including VG annuity specialist.

PS: I find that an immediate fixed IRA for about 25% of my portfolio greatly increases the survivability of my remaining portfolio. Not sure why.

Well, annual RMD's go up each year, so eventually you will have to take extra out of the account. I am not a big fan of SPIAs, they are too limiting. You could accomplish the same thing with more control by either doing a systematic distribution either monthly, quarterly or annually to match your annual RMD. I am also not a fan of fixed annuities, the rates, (other than the early 80's) aren't that great.

I think you could accomplish your goals in other ways.............

 

[whitestick]

Also, I believe the purpose of RMDs is to drain the IRA to $0 based on an actuarial table life expectancy. Not sure how you would ever get to that point, if 25% of IRA is invested in an annuity, as you would seemingly have to withdraw a lump of that 25% to take it out of the IRA. Given that it is paying periodic payments, there might be a prohibition on that. I tried to set up my pension to pay into an IRA and they wouldn't allow that, as there was a ban on periodic payments into an IRA when there was no end day other then dying. I'm assuming a similar ban on extracting payments might also be in effect. Maybe Martha knows better