Suze Orman's Women & Money (And Everyone Smart Enough To Listen)

Suze School: Annuities in Retirement Accounts - I Don't Think So!

Aug 27, 2023

The podcast delves into understanding annuities in an IRA rollover and their impact on required minimum distributions (RMDs). It explains the calculation process for RMDs and highlights confusion surrounding annuitized annuities in retirement accounts. The importance of beneficiary designation and the implications of immediate annuities in retirement accounts are also discussed. In addition, the hosts share an affirmation and introduce a high-interest certificate of deposit offered by Alliance.

19:18

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Quick takeaways

Calculating RMDs for annuities after annuitization can be complex and lack clarity, requiring individuals to consider their life expectancy and subtract the annuity payments from the calculated RMD for the IRA's ending balance.

It is generally advised to keep annuities, especially variable annuities, outside of retirement accounts due to the complex and ambiguous laws surrounding RMDs and annuities within retirement accounts.

Deep dives

RMDs and Annuities

When reaching the age of 73, individuals are required to take out RMDs (required minimum distributions) from pre-taxed retirement accounts. For individuals with annuities that are going to be annuitized and continue past the age of 73, there are specific rules to consider. One must calculate their life expectancy based on the IRS Uniform Life Time table, and divide the ending balance on non-annuity investments in their IRA by this life expectancy to determine the RMD. For annuities, the IRS used to consider the annuity payment as the RMD. However, with the introduction of Secure Act 2.0, it is now possible to subtract the annuity payments from the calculated RMD for the IRA's ending balance and pay only the remaining amount.

Introduction

3min

Calculating Required Minimum Distributions (RMDs) for Retirement Accounts and Annuities

11min

Confusion and Considerations When Owning Annuities in Retirement Accounts

3min

Importance of Beneficiary Designation and Implications of Immediate Annuities in Retirement Accounts

2min

Affirmations and a High-Interest Certificate of Deposit

3min

As a follow-up to a question on last Sunday’s special Ask KT & Suze Anything, Suze does a deep dive explaining how to handle an annuity inside an IRA rollover and how that impacts your RMD.

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