How is the RMD calculated for an IRA annuity with a Lifetime Income Rider?

[mitchden1]

I have been getting a 1099-R every year since I started taking the income rider distributions - beginning at age 59.5 As far as the contact value going to zero, I agree that the account will continue to grow, however,  since the rider allows me to take 5%/year of the protected payment base, the contract value will decrease by this amount every year and will eventually be zero - unless they take into account the fair market value of the rider. In that case, the contract value will always include the fair market value of the income rider and never be zero. The 5% distribution from the rider is significantly higher than the growth of the contract - especially now that the rider has been distributing 5%/year for the last 10 years. 2020 will be the first year that I will be subject to the RMD.

I agree it’s not straightforward. I did talk to their representative, however, I don’t think he fully understood my questions.

[Critter]

If you have been getting a 1099 every year from just this annuity then that must be the ONLY thing in the IRA.

[mitchden1]

That's correct for this IRA. This is the only IRA that I've been taking withdrawals from - under the lifetime income rider. In 2020, I will be 70.5 and be required to take the RMD. Up to now, the RMD hasn't been required.

[LizaBBBB]

Is the account value the accummulation value, or the value minus any surrender charge?

[dmertz]

Perhaps neither.  The annuity company is now required to provide a value to be used for the purpose of calculating the RMD.  Regardless, the surrender charge is not a factor in determining the value for RMD purposes.

[LizaBBBB]

Would the cash value be the determining factor?

[dmertz]

It's a factor, but may not be the only factor, especially if the annuity has a guaranteed income rider or other enhancement.

[LizaBBBB]

No riders, as best as I understand. 

[dmertz]

You posted on a thread that was originally asking about an annuity with a rider.  If the annuity has no actuarial value beyond the accumulation value, the year-end accumulation value would be the amount on which to base the RMD.  For more details, see CFR 1.401(a)(9)-6 Q&A-12:

 https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR6f8c3724b50e44...

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