Question: How does a SPIA from iIRA affect RMDs?

[misanman]

We are considering the purchase of a SPIA using funds from our tIRA but I'm wondering how this affects the tIRA RMDs.

Does the purchase of the SPIA immediately reduce the balance in the tIRA so that the RMDs for the following year, which would be based on year-end balance, are reduced accordingly?

Does the SPIA purchase have any impact on income tax reporting for the year in which purchased?

Thanks!

 

[zinger1457]

I believe the RMD for the year (say 2020) is determined from the IRA balance on 12/31/19. If you purchase a SPIA in the middle of 2020 then the SPIA distributions received during 2020 would count towards the 2020 RMD for the first year only. In follow on years you would have to calculate the RMD based on what your remaining IRA balance is, the SPIA is no longer part of the RMD calculation. The SPIA distribution is treated like any IRA distribution, it will be taxed in the year received, you will have the option of deciding how much in taxes you want withheld from the SPIA distribution.

 

[pb4uski]

+1 Future RMDs based on tIRA excluding SPIA.