Annuities as an RMD answer: navigating potential pitfalls
August 12, 2016 by William H. Brynes, Robert Bloink
While many advisors have counseled against purchasing an annuity with IRA funds in the past, in today’s post-recession world, there are a variety of valid reasons why a client may be interested in the annuity-within-an-IRA strategy. However, as with any retirement income planning strategy, the pitfalls associated with a poorly executed annuity purchase strategy can cause unnecessary expenses and disappointment down the road.
This is especially true if the client is planning to use the annuity as a tool for simplifying his or her IRA required minimum distribution (RMD) obligations. Because a separate set of rules governs each individual type of annuity that may be held within an IRA for RMD purposes, it is important that the advisor carefully examine the proposed annuity purchase in light of the client’s goals in order to ensure not only that the RMD rules are followed, but also that those goals are furthered.
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