Can You Satisfy the RMD Rules with the Purchase of an Annuity Contract?
Your purchase of an annuity contract with the funds in your IRA or retirement plan satisfies the RMD rules if all of the following are true:
Payments are made at least yearly
The annuity is purchased on or before the date that distributions are required to begin
The annuity is calculated and paid over a time period that does not exceed those permitted under the RMD rules
Payments, with certain exceptions, do not increase
If you participate in a 401(k) (or similar plan) or an IRA, you may also be able to use up to 25% of your account balances (up to a maximum of $130,000 from all accounts, indexed for inflation) to purchase a qualifying longevity annuity (or QLAC). The value of the QLAC is disregarded when you calculate the amount of RMDs you are otherwise required to take from your account each year. Payments from the QLAC can be delayed up to age 85, and are treated as satisfying the RMD rules when paid. The rules can be complicated, and QLACs are not right for everyone, so be sure to consult a qualified professional for further information.