Important: This article provides general educational information, not individualized insurance, investment, tax, or legal advice. Annuity guarantees depend on contract terms and the issuing insurer's financial strength and claims-paying ability. Product availability varies by state.
Table of Contents
- Understanding Required Minimum Distributions and Annuities
- Do Annuity Payments Count Toward Required Minimum Distributions
- RMD Calculation for Annuity in IRA or Qualified Plan
- Annuitizing a Traditional IRA and RMDs
- RMD Rules for Inherited Annuities
- SECURE 2.0 Act Updates to Annuity RMD Rules
- Steps to Verify Your RMD and Annuity Coordination
Last Updated: October 8, 2026
Understanding Required Minimum Distributions and Annuities
Required minimum distributions (RMDs) are mandatory withdrawals from certain retirement accounts. The IRS requires owners to withdraw a specific amount each year once they reach a certain age.
An RMD is the minimum amount you must withdraw annually from qualified accounts such as traditional, SEP, and SIMPLE IRAs, and employer plans like 401(k)s. The IRS calculates it from your account balance and life expectancy.
AnnuityTown provides educational resources on how annuities may affect RMD obligations. This guide covers key rules, calculations, and scenarios.
What RMDs Are and When They Begin
RMDs ensure retirement savings are eventually distributed to owners or beneficiaries; the IRS does not allow indefinite tax deferral in most retirement accounts.
RMDs must begin by April 1 of the year after you reach age 73, an age changed by the Secure 2.0 Act from 72 (Retirement plan and IRA required minimum distributions FAQs).
The specific rules depend on your account type:
- Traditional IRA: RMDs begin at age 73
- SEP IRA: RMDs begin at age 73
- SIMPLE IRA: RMDs begin at age 73
- 401(k), 403(b), 457 plan: RMDs begin at age 73 (unless you still work and your plan allows delayed distributions)
If you own multiple IRAs, you must aggregate the balances to calculate a single RMD. However, employer-sponsored plans are calculated separately.
How the IRS Calculates Your RMD Amount
The basic formula is: Account Balance (as of December 31 of prior year) ÷ Life Expectancy Factor = RMD Amount
The IRS publishes life expectancy tables assigning a factor by age; the Uniform Lifetime Table applies to most owners.
In practice:
- Determine your December 31 balance from the prior year
- Find your age and life expectancy factor on the Uniform Lifetime Table
- Divide the balance by that factor to get your RMD for the current year
The IRS updates these tables periodically. Current tables are available on the IRS website for RMD guidance.
Do Annuity Payments Count Toward Required Minimum Distributions
This is a common question about how annuities affect required minimum distributions. The answer depends on the annuity type and structure.
When Annuity Payments Satisfy an RMD
Annuity payments from a qualified annuity, one held inside a traditional IRA or employer plan, may count toward your RMD in certain situations.
Conditions generally include:
- The annuity is held within a qualified retirement account (IRA or employer plan)
- It provides periodic payments (monthly, quarterly, or annual)
- Payments are based on life expectancy or a fixed period
- The contract meets IRS requirements for RMD compliance
When these conditions are met, the annuity payments you receive can count toward your annual RMD obligation.
The key requirement is that payments be "substantially equal" periodic payments, consistent year to year or following a predetermined IRS-recognized schedule.
When Annuity Payments Do Not Count
Not all annuity payments satisfy RMD obligations.
Nonqualified annuities, purchased with after-tax dollars outside a retirement account, do not count toward RMD requirements. You must still take RMDs from any traditional IRA or employer plan separately.
Payments may also not count if:
- The annuity is not structured to meet IRS RMD rules
- Payments are irregular or lack a predetermined schedule
- The contract does not comply with IRS requirements
- The annuity is held in a Roth IRA (which has different RMD rules)
If you own a qualified annuity and other retirement accounts, annuity payments count only toward the RMD for the account holding the annuity. Payments from one account generally cannot satisfy RMDs from another, except in specific IRA aggregation circumstances.
RMD Calculation for Annuity in IRA or Qualified Plan
When an annuity is held inside an IRA or qualified plan, the RMD calculation follows specific rules that depend on the annuity type and structure.
Qualified Annuities and the Uniform Lifetime Table
A qualified annuity held in an IRA or employer plan is subject to the Uniform Lifetime Table, the standard table the IRS uses for most owners.
If the annuity is your IRA's only asset, divide its value by the life expectancy factor for your age.
If your IRA holds both an annuity and other investments, you aggregate all assets.
Annuity payments may satisfy all or part of this RMD.
Nonqualified Annuities and RMD Exemptions
Nonqualified annuities are not subject to RMD rules because they are held outside a retirement account; the IRS does not require age- or life-expectancy-based distributions from them.
Owning a nonqualified annuity does not eliminate RMD obligations for other accounts. Traditional IRAs and 401(k)s still require separate RMD calculations and withdrawals.
Some individuals use nonqualified annuities to supplement retirement income without triggering additional RMD calculations.
Annuitizing a Traditional IRA and RMDs
Annuitization converts an IRA balance into an annuity contract providing regular income payments, with significant implications for RMD obligations.
How Annuitization Changes Your Distribution Obligation
When you annuitize a traditional IRA, the account balance becomes a stream of income defined by the contract. Once annuitization occurs, your RMD calculation changes.
Annuity payments become your primary distribution method.
If the annuity payment is lower than your calculated RMD, the obligation is not fully satisfied and additional distributions may be required, depending on contract terms and IRS rules.
Coordinating Annuity Payments with Other Account Withdrawals
If you own multiple retirement accounts, coordinating withdrawals is essential; one account's distributions generally cannot satisfy RMDs across all accounts.
Coordination generally works like this:
- Calculate each account's RMD separately (employer plans cannot be aggregated with IRAs)
- Aggregate IRA balances to determine a single combined IRA RMD
- Withdraw at least that amount across all IRAs by December 31
- Satisfy employer plan RMDs from that specific plan
For example, if your combined IRA RMD is $15,000 and your annuity pays $10,000 annually, you must withdraw an additional $5,000 from one of your IRAs to satisfy the full RMD.
Employer plans (401(k), 403(b), 457) cannot be aggregated with IRAs; each plan's RMD must be satisfied separately.
RMD Rules for Inherited Annuities
Inheriting an annuity creates new RMD considerations depending on your relationship to the original owner and the account type.
Beneficiary Distribution Periods and Annuity Contracts
The Secure 2.0 Act changed inherited IRA rules: most non-spouse beneficiaries must withdraw the entire inherited balance within 10 years of the owner's death, the 10-year rule.
Annual distributions are not required during those 10 years, but the account must be fully distributed by the end of year 10.
Spouse beneficiaries have more flexibility: they may treat the inherited IRA as their own, delay distributions until age 73, or roll it into their own IRA.
SECURE 2.0 Changes for Inherited Annuities
The Secure 2.0 Act made substantial changes to inherited retirement accounts.
Under the new rules, most non-spouse beneficiaries must withdraw the entire inherited account within 10 years, applying to IRAs and certain employer plans inherited after December 31, 2022.
Certain beneficiaries are exempt from the 10-year rule:
- Spouse beneficiaries
- Minor children (until the age of majority)
- Disabled or chronically ill individuals
- Beneficiaries not more than 10 years younger than the owner
If you fall into one of these categories, different rules may apply.
If the inherited account contains an annuity, contract terms regarding distributions must be coordinated with Secure 2.0 Act rules. Contract terms may be more restrictive than IRS rules, requiring faster distributions.
SECURE 2.0 Act Updates to Annuity RMD Rules
The Secure 2.0 Act, enacted in 2022 and implemented in 2023, changed how annuities interact with RMD rules for distributions taken after December 31, 2022.
One change raised the RMD age from 72 to 73 for individuals who had not yet begun taking RMDs as of January 1, 2023.
Secure 2.0 also changed inherited account rules, affecting how beneficiaries coordinate annuity payments with RMD obligations.
For current information on Secure 2.0 Act implementation, consult IRS guidance on Secure 2.0 changes.
Steps to Verify Your RMD and Annuity Coordination
Verifying your RMD and coordinating it with annuity payments helps you avoid penalties and stay compliant with IRS rules.
Gathering Your Account and Contract Information
Start by collecting your account statements, annuity contract, and correspondence from your financial institution.
Gather:
- Year-end statements from all IRAs and employer plans
- Annuity contract and any amendments or riders
- Beneficiary designation forms
- Custodian or plan administrator notices about RMDs
- Documentation of your age
Review statements to determine each account's total balance as of December 31 of the prior year, the figure used for RMD calculations, not your current balance.
If you own multiple IRAs, list each balance. IRAs are aggregated for RMD purposes, but employer plans are calculated separately.
For any annuity, note the contract or surrender value as of December 31, typically shown on your annual statement.
Working with Your Custodian and Annuity Provider
Your custodian (the institution holding your IRA) and annuity provider can help clarify RMD obligations and discuss how annuity payments may be coordinated.
Contact your custodian for a formal RMD calculation; many provide this based on your account balance and age.
For your annuity, ask the insurer or provider to confirm:
- The annual payment amount
- Whether the annuity is structured to satisfy RMD requirements
- How it interacts with your overall RMD obligation
- Options for adjusting payments or taking additional distributions
Provide each party with the other's contact information if they do not already communicate, which may help in understanding your RMD across accounts.
Request written confirmation of your RMD calculation and how annuity payments are credited, and keep these documents.
Consulting a Tax Professional About Your Situation
Your tax situation may involve complexities requiring professional guidance. A qualified tax professional can review your circumstances and help you understand your RMD obligations.
A tax professional can help with:
- Calculating RMDs across multiple accounts
- Understanding how annuity payments affect your taxes
- Coordinating distributions
- Planning for inherited accounts or beneficiary rules
- Addressing penalties or missed distributions
Because tax rules depend on your circumstances, age, account types, and annuity structure, professional guidance can be valuable.
When consulting a tax professional, bring account statements, annuity contracts, and any previous RMD calculations.
Understanding how annuities affect required minimum distributions requires attention to account types, annuity structure, and IRS rules.
Frequently Asked Questions
Can annuity payments count toward my required minimum distribution?
Annuity payments held in a qualified account (traditional IRA or employer-sponsored plan) can count toward your RMD if the annuity contract meets IRS requirements for periodic payments. The annuity must distribute a fixed amount or a percentage of the account balance annually. Payments from nonqualified annuities generally do not count toward RMD obligations because the funds were never subject to RMD rules in the first place. Your custodian or annuity provider can confirm whether your specific contract qualifies.
How is my RMD calculated when my IRA holds an annuity?
Your RMD is calculated by dividing your account balance at the end of the previous year by a life expectancy factor from the IRS Uniform Lifetime Table. This applies whether your IRA holds an annuity or other investments. The account balance includes the current value of the annuity contract. If the annuity is paying out periodic distributions, those payments reduce the account balance used in the calculation. Your IRA custodian typically calculates this amount and notifies you by December 31.
What changed for annuities and RMDs under the SECURE 2.0 Act?
The SECURE 2.0 Act made several changes affecting annuities and RMDs. One key change involves qualified longevity annuity contracts (QLACs), which allow you to exclude up to a specified dollar amount from your RMD calculation. The Act also modified rules for inherited annuities, requiring most non-spouse beneficiaries to distribute the account within 10 years. These changes took effect in phases, with some provisions applying to distributions made after December 31, 2022. A tax professional can explain how these changes apply to your specific accounts.
Do I have RMD obligations if I inherit an annuity?
RMD rules for inherited annuities depend on your relationship to the original owner and the type of annuity contract. Spouses who inherit an annuity may treat it as their own, deferring distributions until age 73. Non-spouse beneficiaries must generally distribute inherited annuities within 10 years under SECURE 2.0 rules, though the distribution method depends on the contract terms and whether the original owner had begun taking distributions. The annuity provider and a tax professional can clarify your specific distribution timeline and requirements.