Golly! Did you know you can hold annuities in your IRA account?

[Jingthing]

Annuities in general are quite complicated and there are a lot of options.

I had incorrectly thought until now that you couldn't use funds in your IRA (trad or Roth) to buy annuities, but it turns out you can!

There are different reasons people want annuities held in or out of IRAs and there are different types of annuities, and specific rules for holding in IRAs.

I'm just learning about such matters myself.

For me, an annuity might be attractive now as:

-- a way to diversify my IRA which is now 100 percent equities as I think there will be a Trump crash once his policies (tariffs, mass deportations) kick in. I also don't believe he will bring peace to the world. More likely the opposite from China.

-- The money in an annuity brings a fixed income for either defined fixed terms or life without the risk of equities but with the risk of the soundness of the annuity.

-- Annual payments from annuities (which may be deferred with some types of annuities) are taxable income.

-- Annuity contracts have legacy options, such as do you want the annuity to continue to pay out to beneficiaries or not. If not the payout amount can be based on life expectancy, for example buy it when older and get a higher payment.

-- HOWEVER, the money you take to buy an annuity out of your IRA reduces the value of the IRA in terms of the RMD (required minimum withdrawal at about age 72-3).

-- So for example if you have 500K in your IRA and you buy a 200K annuity the RMD will be based on 300K, not 500K

-- There are age rules for buying annuities in IRAs

-- Overall if you do want an annuity and your money is in an IRA, it's great to be able to buy from the IRA, as otherwise you would be forced to withdraw the amount of the annuity purchase from your IRA, a taxable event, so that would be crazy.

 

I'm just scratching the surface here. I've never hired a financial advisor but this might be an area where that is worth doing (if you know you're getting a good one). 

 

The main reason I'm posting this is that I assume as I didn't know, there must be others who didn't know that you CAN buy annuities within IRAs.

 

Edited 4 hours ago by Jingthing