Can I Purchase a Joint Annuity with Pre-Tax Dollars?

[gus82570]

Hello all,

I have 100k in a rollover IRA and I would like to purchase a "joint" (wife and myself) immediate annuity for the same amount; however, I don't know if it can be done. Specifically, I'm concerned about all the documentation that states the annuity "might" satisfy all the IRS requirements for RMDs beginning at 70 1/2.

Here are my questions:
First, the 100k is pre-tax dollars that are all in my name exclusively, so if I am allowed to add my wife as a joint annuitant, how will that affect my ability to meet the RMD requirements for myself and my wife?

It all sounds too complicated for me; however, if anyone can make sense of my situation and can offer some clarifications, I would greatly appreciate the advice!

Thanks in advance for your help,

Best regards,

gus

 

[Charpress]

No IRA can be jointly owned, so therefore no asset within the IRA can be jointly owned, so that would be out. Your wife could certainly be a beneficiary and thereby inherit the IRA with annuity if you died.

Why an immediate annuity? Are you over 59.5 and just want an income stream? The annuity company can answer any questions about putting an immediate into an IRA and the requirements.

Your wife would have no RMD requirements while you are alive because she could not be a co-owner. If she survives you, then she could continue getting the payments out of the IRA. That is just one reason an immediate annuity could be a bad choice. She would have no options as to the amount of income or the terms of payment.

 

[gus82570]

Hello Charpress,

Thank you for the clarification; therefore, can I assume that a joint annuity can only be purchased with post-tax dollars?

Thanks again,

gus

 

[dmarbell]

Gus,

Call some annuity companies and ask them. Some annuities are owner driven, and some are annuitant driven. (Not sure if this applies to SPIAs either.) You can't change ownership, but in some cases I believe you can add a joint annuitant without disturbing the pre-tax qualification of the account. Companies can usually tell you that.

Danny

 

[gus82570]

Hello Danny,

Thank you for your response and recommendations.

I have made those calls and every insurance company gives me a different set of answers with a lot of "I don't know" and/or "I'm not sure" responses mixed in. Anyway, I have settled on working with an agent from one specific company and he will try to get answers from his legal department. However, I also cautioned him that I need specific IRS references that would back up his response (if it is "yes we can do that"). Again, it is really surpising how much these up-front sales agents do not know about their business; however, I do understand that what I am attempting is not a typical annuity purchase.

Best regards,

Gus

 

[VolAgent]

What kind of annuity do you want? I know LFGs variable and indexed annuities will do the income stream on a joint life basis. There are others out there that will do this as well. It sounds like you aren't talking to the right people.

 

[Charpress]

I'm not surprised that you have trouble with insurance companies not being sure of the correct answer to your questions. Some companies are much better at this than others. Some pay to have knowledgeable people on the front line for you to talk to.

Anyway. Assuming someone made the decision that a SPIA was a good fit for an IRA for whatever reason (and there would be very few reasons), then it is simply a matter of making sure the SPIA is lifetime payout, which would satisfy RMD requirements. There are exceptions, as always, and there are ways to fine-tune this.

 

[gus82570]

Hello Volagent,

I am only interested in an SPIA but thanks anyway.

Hello Charpress,

I did make the SPIA decision due to the current economic circumstances. I had a portfolio filled with 6% yielding CDs and now they are all being "called." This portfolio has served me well for over 8 years and I still have all my original principle after drawing 50k per anum. Based on this, one can assume I'm a conservative investor, and since there is nowhere to safely earn a 6% yield today, I just wanted to test the waters with a 100k annuity and see if that would work for me and my wife. Also, I have no concerns that this money would not be available to my heirs.

It is also important to understand that we are living off the interest from above and have no other income; however, I only have 1 year to go for SS so that should fill in some of the income gaps.

Thanks,

gus

 

[VolAgent]

Hello Volagent,

I am only interested in an SPIA but thanks anyway.

Hello Charpress,

I did make the SPIA decision due to the current economic circumstances. I had a portfolio filled with 6% yielding CDs and now they are all being "called." This portfolio has served me well for over 8 years and I still have all my original principle after drawing 50k per anum. Based on this, one can assume I'm a conservative investor, and since there is nowhere to safely earn a 6% yield today, I just wanted to test the waters with a 100k annuity and see if that would work for me and my wife. Also, I have no concerns that this money would not be available to my heirs.

It is also important to understand that we are living off the interest from above and have no other income; however, I only have 1 year to go for SS so that should fill in some of the income gaps.

Thanks,

gus

Why a SPIA? I just ran LFGs VA versus the SPIA, joint life on both. I assumed you are 64 and your wife 63. The VA had a better pay out. I admit, I am not the best with the illustration software, generally I get someone else to run it for me. Perhaps I just entered the info wrong, but sounds like you'd be better off not doing a SPIA.

 

[gus82570]

Hello Volagent,

Thanks for your help and opinions; however, I am not interested in anything variable or indexed where my payment might change down the road.

I am 61 and my wife is 51.

Right now, we receive $500.00 monthly for each 100k investment (6% yield) and that is secured by the FDIC.

I need a safe place to get a similar return with no chance of variance to the payment and no chance to lose the principle (doesn't PA secure that via their Guaranty Insuranc Fund?).

Some corporate bonds offer a death-put redemption; however, that is useless if the business fails (like GM did); however, their yields are so low right now, an investment wouldn't be worth it.

Remember, I'm living off that income exclusively and I'm about to incur a 33% income loss if I can't get close to that 6% mark.

Another option would be for me to just stick the money in a 1% CD, wait for SS next year, and then see what's available. It would cost me about 15k to do this option.

In summary, anyway this turns out, I will be just fine financially so I thank you all for your responses, opinions and recommendations.

Gus