Variable annuity

I have a variable annuity that was funded with after tax money. The earnings have never been taxed.

I am just turning 73, are RMDs required?

Is withdrawn money taxed as a capital gain or as regular income?

Can the withdrawn money all be original money (non taxable) or all earned money (taxable) or is it apportioned between original money (about 20%) and earned money (about 80%)

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Accepted answers

KeriC

A variable annuity account held outside of an IRA is considered a "non-qualified" annuity and is not subject to RMD requirements.

All comments

DennisR

For taxpayers that turn 73 in 2024, your first RMD is due by April 1st, 2025 based on your account balance on Dec. 31st 2023. Hhowever, RMDs are only required from traditional IRAs (pre-tax). Roth IRAs (post-tax) do not have an RMD requirement.

Distributions from Roth IRAs are nontaxable, though the earnings might be considered taxable income (not capital gain income).

Retirement plan and IRA required minimum distributions FAQs | Internal Revenue Service

MatthewD

Hi SteveB,

Yes an RMD is required for a Qualified Variable Annuity held in an IRA. RMD's are required for other tax-qualified Annuities and accounts.

The income is a distribution and is taxed as regular income.

The distribution can be the original (basis) or the taxable earnings. However, keep in mind it can't be separated and is prorated. Like you said it is "apportioned".

steveb

This is a variable annuity that is not part of any IRA. The earnings on the variable annuity have grown tax sheltered but it is not nested in an IRA of any kind. It is just a free standing variable annuity. So is an RMD required for this investment.

MatthewD

Hi SteveB,

Keep in mind your distributions from the annuity are reported on form 1099-R: Retirement Distributions. Box 7 of that form will have a code, which determines the taxability of the distribution. So look for that as you start using the annuity. It is really hard to give you a definitive answer without seeing the details.

steveb

So do you know if an RMD is required for this investment? If not, then I will not be taking distributions from it for some time. It has not been anuitized and never will be. I will just take variable distributions from it if needed and leave the rest as an inheritance. Thanks for all of your help.

KeriC

A variable annuity account held outside of an IRA is considered a "non-qualified" annuity and is not subject to RMD requirements.