Discussion Posts

    • RMD on beneficiary IRA/ SPIA

      • Posted by anonymous
      • on August 18, 2008 6:58 AM EDT

      I believe that I understand the RMD rules for beneficiary IRA's (non-spousal beneficiary).

      What I don't know is whether a non-spousal beneficiary can purchase a SPIA (life or life with period certain).

      My guess is "no".   My reasoning is simply that a SPIA will result in RMDs that will result in a payout that could exceed the life expectancy of the person.   When it comes to "regular" IRAs, we know that the SPIA's are an exception that specifically meet the RMD requirements.  I don't know if there is an exception with beneficiary IRA's.

      Can a SPIA be purchased for a non-spousal beneficiary IRA? 

       
    • Re: RMD on beneficiary IRA/ SPIA
      • Posted by Michael E. Kitces
      • on August 18, 2008 3:45 PM EDT

      Anonymous,

      An immediate annuity can be used to satisfy the RMD requirements for an IRA, including the RMD requirements of a non-spouse beneficiary. (Treas. Reg. 1.401(a)(9)-5, Q&A-1(e)). Generally, the annuity must be actuarially sound, and should either be a life contingent annuity, or for a period certain that is no longer than the individual's life expectancy, in accordance with Treas. Reg. 1.401(a)(9)-6, Q&A-4.

      In the general case, a standard commercial SPIA will almost always comfortably satisfy the requirements for a non-spouse beneficiary's RMDs. At worst, confirm with the annuity carrier's Advanced Markets Department to ensure no problems along the way.

      I hope that helps a little!

      Respectfully,
      - Michael E. Kitces, MSFS, MTAX, CFP(r), CLU, ChFC
      Publisher, The Kitces Report, www.kitces.com
      Blogger, Nerd's Eye View, www.kitces.com/blog