Do Annuities Have Required Minimum Distributions (RMDs)?

Do Annuities Have RMDs?

•  Qualified annuities (inside IRAs, 401(k)s, 403(b)s, 457(b)s, TSP) are subject to RMDs because the account is tax-deferred.
• Non-qualified annuities (after-tax money, held outside retirement plans) do not have RMDs, though withdrawals and income are still taxable under annuity tax rules.

Beneficiary Alert: Did you inherit this account? Standard RMD rules do not apply to you the same way. You must follow the applicable beneficiary rules outlined in our guide on inherited annuity distribution rules.

How To Preserve Your RMDs

Which Types Of Annuities Have RMDs

Qualified Annuities and RMDs

If you own an annuity within a qualified plan like an IRA or 401(k), you must comply with Required Minimum Distribution (RMD) rules. These rules require you to start withdrawing a minimum amount from your account annually, starting at age 73. This requirement ensures that the government can collect taxes on funds that have grown tax-deferred. All withdrawals and payments from these qualified annuities count toward your RMDs, ensuring you meet the minimum required amounts each year.

Helpful Tip: While qualified plans generally force these withdrawals, there are specific legal strategies (like QLACs or Roth conversions) to minimize, delay, and help avoid them using life insurance and annuity strategies.

Non-Qualified Annuities and Exemption from RMDs

Non-qualified annuities, funded with after-tax dollars and not part of a retirement plan, are exempt from RMD rules. You are not required to take distributions at any age, giving you more flexibility and control over when you access these funds. This makes non-qualified annuities an attractive option for those who wish to defer income until it is most beneficial for their financial situation.

Roth IRA Annuities and No RMDs

Roth IRA annuities provide a unique advantage. Unlike traditional IRAs, Roth IRAs are not subject to RMD rules during the account holder’s lifetime. This feature allows your investments to continue growing tax-free, offering a strategic benefit in retirement planning.

CRPC Pro Tip: Before calculating the specific withdrawal for your contract, ensure you have a baseline understanding of the general RMD rules set by the IRS. For 2026, most retirees must begin withdrawals at age 73, though certain annuities allow you to “aggregate” these distributions across multiple IRAs to stay compliant.

When Do RMDs Start?

For most retirement accounts, including qualified annuities, RMDs begin at age 73. This age marks the point at which the IRS mandates that you start withdrawing from your retirement savings, ensuring taxes are eventually paid on these deferred funds.

Will RMDs Reduce Your Annuity Income Rider?

Annuity RMD Table

Understanding the distinctions between qualified, non-qualified, and Roth IRA annuities helps you manage your retirement distributions effectively and in compliance with IRS regulations.

Current RMD Guidelines

• QLAC limit (inside IRAs/plans): The old 25% cap is repealed. The dollar cap is $210,000 for 2026 (indexed in future years). QLAC premiums are excluded from the balance used to calculate near-term RMDs.
• Start age: You must begin RMDs at age 73 for people born from 1951 through 1959 and age 75 for people born in 1960 or later. Your first IRA RMD can be delayed until April 1 of the year after you reach the required beginning date; all subsequent RMDs are due by December 31 each year. A “still-working” exception can delay plan RMDs (not IRAs) if your employer plan allows it and you’re not a 5% owner.
• The “Still-Working” Exception: If you are still actively employed, do not own more than 5% of the company, and your employer’s specific plan document permits it, you can delay taking RMDs from your current workplace retirement plan until you officially retire. This exception never applies to traditional individual IRAs.
• Roth 401(k)/403(b) RMDs: Designated Roth accounts inside employer-sponsored workplace plans are completely exempt from lifetime RMD requirements, bringing them into alignment with traditional Roth IRAs. Just note that inherited Roth accounts passed to non-spouse beneficiaries are still subject to standard IRS distribution timelines.
• Missed-RMD penalty: The excise tax is 25% of the shortfall, reduced to 10% if corrected within the allowed window and reported on Form 5329.

When reviewing whether annuities have required minimum distributions (RMDs), the best annuities for baby boomers can help coordinate retirement income with RMDs, inflation, future care costs, and legacy goals as retirement gets closer.

LIFO vs. Exclusion Ratio During the Income Phase

• Qualified annuities: Whether annuitized or using a GLWB, payments are generally fully taxable as ordinary income (except for any after-tax contributions tracked separately in certain employer plans).
• Before annuitization (including GLWB withdrawals) on a non-qualified annuity: Distributions generally follow LIFO—earnings come out first and are taxable until gains are exhausted.
• After annuitization on a non-qualified annuity: Payments use the exclusion ratio—a portion of each payment is a tax-free return of basis, and the rest is taxable income.

Funding an Annuity with RMDs

QLAC: Lower Near-Term RMDs and Back-Load Income

A Qualified Longevity Annuity Contract (QLAC) lets you move up to the current indexed dollar cap (2025: $210,000) from an IRA or eligible plan into a deferred income annuity. That premium is excluded from the RMD calculation until income starts (no later than age 85), which can cut tax brackets or Medicare surcharges in your early 70s.

Inherited IRA: The 10-Year Rule in 2026

For most non-spouse beneficiaries inheriting a retirement account, the entire balance must be completely emptied by December 31 of the 10th year following the original owner’s death. Following a series of temporary penalty waivers that covered prior transition years, the final IRS regulations are now fully in effect for 2026. This means that if the original account owner had already reached their mandatory age to begin taking required minimum distributions, you cannot simply wait until the 10th year to empty the account; you are legally required to take mandatory annual RMDs during years 1 through 9. Only specific “Eligible Designated Beneficiaries”—such as surviving spouses, minor children of the owner, the disabled or chronically ill, and individuals not more than 10 years younger than the deceased—are exempt from this strict window and can still choose traditional life-expectancy payouts.

RMD-Waiver and GLWB Strategies

• Surrender-charge waivers for RMDs: Many fixed and fixed indexed annuities waive surrender charges when withdrawals are needed to satisfy IRS-mandated RMDs.
• Counting GLWB toward RMDs: GLWB income generally counts toward your IRA’s RMD; if it falls short, you take a “top-up” withdrawal. Some contracts allow you to take the greater of the GLWB payout or the RMD without penalty.
• Timing tip: Automate monthly or quarterly distributions to avoid bunching income in December (which can spike taxes or Medicare surcharges).

Funding Options

Annuities can be funded with cash (non-qualified money), Traditional IRAs, Roth IRAs, 401(k), 403(b), 457(b), TSP, SEP, SIMPLE, 401(a)/profit-sharing, and through rollovers or 1035 exchanges. QLAC premiums must come from IRA or eligible plan dollars and count toward the indexed QLAC cap.

Who Needs This (and Why)

• Age 73+ with large tax-deferred balances who want automatic compliance and predictable income.
• Retirees aiming to manage tax brackets and Medicare IRMAA in their early 70s.
• Individuals seeking a lifetime income through GLWB that satisfies RMD requirements while mitigating market risk.
• Beneficiaries navigating the 10-year inherited IRA rule.

Who Probably Doesn’t Need It (and Why)

• People who are already withdrawing more than their RMDs.
• Households with modest balances where RMDs won’t affect taxes or IRMAA.
• Investors who prioritize full liquidity and don’t want insurer terms or riders.

Pros and Cons

Pros

• Carriers can automate RMD calculations and distributions.
• GLWB offers lifetime income that typically covers RMDs.
• QLAC can reduce early-retirement RMDs and smooth taxes.
• Fixed and fixed indexed annuities can reduce market risk during RMD years.

Cons

• Liquidity limits and potential rider fees.
• GLWB withdrawals from non-qualified contracts follow LIFO (heavier taxation early).
• Annuitization is an irreversible process that utilizes the exclusion ratio.

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