Per IRS requirements, each Dec 31 my Annuity Insurance Company provides an "Entire Interest (EI)" amount for this (Variable) annuity contract consisting of the Account Value and the Present Value of all accrued benefits, eg, Death Benefit (Life Insurance) and Lifetime Income Benefit (annuitization). The Entire Interest amount is used to compute the RMD amount due for that year and, in my case, is always substantially greater than the Account Value.
I have been in "RMD mode" for several years taking lump sum withdrawals from the Account Value to pay the RMDs and taxes. My RMDs are due and paid in the calendar year following the Dec 31 evaluation. For example, the RMD paid in 2021 (and consequently affecting 2021 income tax filings), is based on the 12/31/2020 Entire Interest Value.
I intend to annuitize this contract within the next couple of years and want to do some near term planning. I can annuitize the contract once in any year going forward and anytime within the calendar month of July based of the contract "Anniversary Date".
The question becomes: I will always have an RMD due for the un-annuitized IRA contract, but suppose I annuitize in in July of, for example, 2022. Will there will be an RMD due in 2022 based on the 12/31/2021 EI value even though the IRA Annuity will cease to exist in July 2022. (And thus, no RMD is due in 2023 and beyond.)
Must I take the 2022 RMD from it sometime before (in Jan through June) I annuitize the contract in July? If I don't pull the RMD from the annuity in first half of 2022, and annuitize in July, will I have to make up the amount from my other conventional IRAs? There's some flexibility here ...
I know this seems a bit complicated, and I intend to validate my plan with a local CPA, but in the meantime I would appreciate any commentary from anyone that has already done this or might have insight into any way to optimize this type of situation!
Thanks much!
/ss
PS - My personal recommendation is to avoid IRA Variable Annuities if at all possible. High fees, unwanted life insurance and needless complexities leading to too much brain damage like this example make them just not worth it, except for the crooks that sell them getting fat commissions and trips to Hawaii! 😮
Look to immediate or deferred Income Annuities as much better options if desiring that type of income vehicle. Cheers!
