Missed RMDs from a deferred annuity?

Don TaylorDear Senior Living Adviser,
My mother began a single premium deferred annuity policy in 1994 when she was 71 and has not taken any distributions. The policy has a maturity date in 2018, which, according to the policy, is when payments would begin. We just noticed that she has been receiving notices the past few years from the insurance company stating that the IRS requires an RMD when the owner reaches age 70 1/2. She also receives a Form 5498 with an RMD amount. Should she have started taking RMDs as soon as she began the policy?

-- Baffled Bill

Dear Bill,
A single premium deferred annuity policy can be a way for seniors to insure against longevity risk, the risk of outliving their retirement savings. It's common for these policies to start making payments when the annuitant reaches a particular age.

Senior woman standing by window © Nadino/

Required minimum distributions, or RMDs, come into play for annuities purchased in qualified retirement accounts such as an IRA. So the type of account that funded the purchase determines whether there are RMDs from a deferred annuity. Her receiving IRS Form 5498, IRA Contribution Information, would appear to indicate that the annuity is held in a qualified account. If that's the case, she should work with a tax professional to review her situation.

Try out Bankrate's annuity calculator.

If the annuity is held in a nonqualified account, meaning it was purchased with after-tax dollars, the annuity contract will specify when the annuitant needs to start taking annuity payments. That may be at a specific date, as it appears to be in your mother's case, or at death.

On the horizon is a qualified longevity annuity contract where the deferred fixed annuity will be purchased in a qualified retirement account with no RMDs. There will be size limitations on the accounts.

Get more news, money-saving tips and expert advice by signing up for a free Bankrate newsletter.

Ask the adviser

To ask a question of Dr. Don, go to the "Ask the Experts" page and select one of these topics: "Financing a home," "Saving & Investing," "Senior living" or "Money." Read more Dr. Don columns for additional personal finance advice.

Bankrate's content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate's Terms of Use.


Show Bankrate's community sharing policy
          Connect with us
Find Senior Housing Near You

Let us help you compare

  • Pictures
  • Pricing
  • Options
Zip code or City, State

Get Help Now



Sally Herigstad

Be cautious before helping seniors with their finances

Know what you're getting into before stepping into a legal thicket.  ... Read more


Senior Living Adviser

Raid IRA to get into senior housing?

Dear Senior Living Adviser, I am considering moving into a Continuing Care Retirement Community, or CCRC. I am 72 and retired (except for a couple days a week as an adjunct instructor at a local college, which will end...

View more Bankrate Advisers »

Connect with us