Indexed annuity and RMDs
While I do not offer fixed indexed annuities, I was posed this question:
Many people who bought fixed-index annuities put them into their IRAs. When they reach 70 1/2 years old, they must begin taking distributions from those IRAs. Unfortunately, when one takes money out of this type of annuity, it penalizes the holder by not paying them the gains they made that year. So every year after the fixed index annuity holder turns 70 1/2, they will not be able to receive their growth because ever year, they will be required to take these mandatory distributions.
What is the answer?
Thanks in advance.
James M. Gross
Permalink Submitted by Alan Spross on Thu, 2008-12-04 18:23
Are you sure there is not an exception for RMDs? Insurers are already on the hot seat for selling these to unsuspecting seniors, and if RMDs that obviously begin at 70.5 were ignored, there should be some recourse. The company must also issue a statement of year end value that will have to reflect certain contract features in excess of de minimus regulations.
Of course, this year there will not be any gains on stock indexes for next year, but this year’s RMD may be inflated by the 12/31/07 fair market value.
Permalink Submitted by James Gross on Thu, 2008-12-04 19:25
I figured there would be an allowance for RMDs. It was a question posed to me. I do not offer EIAs, so I did not want to assume the allowance was there.
Thanks,
James M. Gross
Permalink Submitted by Al Fry on Thu, 2008-12-04 20:54
For any quality annuity company, the original IRA owner’s guaranteed withdrawal rights are RMD-friendly. This does not apply to inherited IRAs, since the withdrawal rate is much higher.
Permalink Submitted by charles lore on Fri, 2008-12-05 02:20
hopefully the annuity is not the only asset in the owner’s Aggregated IRA’s. He can take other assets from any of his iras to cover rmds.