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Making an IRA disappear?
Old 02-01-2008, 04:38 PM   #1
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Making an IRA disappear?

If, at age 70 1/2, one purchased an immediate fixed annuity with the entire balance of a traditional IRA, do you still have an IRA after the purchase? If the answer is yes, then what happens further in the future when the RMD requirement exceeds the annual payout on the annuity? If the answer is no, then the RMD requirement is forever satisfied when the annuity is purchased?
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Old 02-01-2008, 07:28 PM   #2
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Depends if the annuity is paid for with after tax money (Roth IRA) or T-IRA which was purchased with after tax dollars (no deduction taken). If not after tax ALL withdrawals will be taxed otherwise part of the withdrawals will be taxed. Talk to the people you plan to purchase the annuity from.
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Old 02-01-2008, 07:47 PM   #3
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Thanks for that reply, but that was not really my question. I know all the distribution will come out as ordinary income. I can't get an answer to this question anywhere.
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Old 02-01-2008, 08:05 PM   #4
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Does this answer your question?
Fairmark Forum :: Retirement Savings and Benefits :: Annuity treatment for RMD calculation
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Old 02-02-2008, 08:18 AM   #5
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Finance Dude's reference tells you that if you bought an SPIA with the entire proceeds of your IRA you could forget about RMDs. If you had another qualified plan or left some $ in the IRA you would have RMDs based on the residual amount.
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Old 02-02-2008, 10:36 AM   #6
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Quote:
Originally Posted by donheff View Post
Finance Dude's reference tells you that if you bought an SPIA with the entire proceeds of your IRA you could forget about RMDs. If you had another qualified plan or left some $ in the IRA you would have RMDs based on the residual amount.
Well, that's what fairmark said. However, I posted this question at an IRA forum for advisors, and I got "it depends", "it might be in the tax code somewhere"...........

It seems logical that a SPIA would remove the RMD, because you would have no way to calculate the year-end value going forward, but methinks the IRS has thought of that already.........
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Old 02-02-2008, 01:10 PM   #7
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I think the "it depends" part is probably correct. From IRS Pub 590: Miscellaneous Rules for Required Minimum Distributions:

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Annuity distributions from an insurance company. Special rules apply if you receive distributions from your traditional IRA as an annuity purchased from an insurance company. See Regulations sections 1.401(a)(9)-6 and 54.4974-2. These regulations can be found in many libraries and IRS offices.
Or you could just contact the IRS for tax help -

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Asking tax questions. Call the IRS with your tax questions at 1-800-829-1040
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Old 02-03-2008, 09:06 AM   #8
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I knew if there was any place I could get an answer it would be here. Many thanks. The annuity person at VG said their position is that whatever amount the SPIA is, the RMD is satisfied for that amount only. I assume that this would be true even if said amount was the entire balance (but I did not think to axe that until afterwards).
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