Shrink Your RMDs in 2021 and Beyond

Special type of annuity lets you cut IRA RMDs next year, cut taxes and guarantee more lifetime income in old age

MEDFORD, OR / ACCESSWIRE / September 9, 2020 / People who don’t need income from their IRA, SEP, and/or 401(k) are benefiting from this year’s waiver of required minimum distributions (RMDs). They’re reducing income taxes and preserving their plan assets.

But RMDs will return in 2021. Since retirees will be a year older than when they last took their RMDs, they’ll have to take out a slightly higher percentage from their retirement plans, says Ken Nuss, CEO of AnnuityAdvantage, an online annuity marketplace.

There’s one little-known way to reduce “RMD shock” in 2021 and beyond. That’s by placing some of your funds in a qualified longevity annuity contract. A QLAC is a type of deferred income annuity designed to meet IRS requirements. The money in a QLAC is excluded from assets on which future RMDs are calculated.

You pay a single premium and then choose when to start receiving a stream of lifetime income by age 85 at the latest. Deferring RMDs let you keep more of your retirement plan intact and tax-deferred. A QLAC saves up to one-fourth of the IRA for the future production of guaranteed income, he says.

Postpone up to 25% of your RMDs for years

An IRA owner can place 25% of his or her IRA balance, up to $135,000, in a QLAC. For instance, at age 75, $135,000 in a QLAC avoids $5,895 of taxable RMDs you’d otherwise have to receive. At 84, you’d avoid $8,710 of RMDs.

Create more lifetime income

The biggest advantage is that you’ll create a larger stream of income you can’t outlive.

You don’t have to wait until 72 to buy a QLAC. The earlier you purchase one, the longer you’ll get to build up principal and the bigger payout you’ll ultimately get.

Because you’ll have a new source of guaranteed income coming available at the time of your choosing, you may be comfortable taking more market risk with other assets in your plan and earning higher returns.

Annuity expert Ken Nuss is the founder and CEO of AnnuityAdvantage, a leading online provider of fixed-rate, fixed-indexed, and immediate income annuities. It provides a free quote comparison service. He launched the AnnuityAdvantage website in 1999 to help people looking for their best options in principal-protected annuities. Ken writes on retirement income and annuities regularly for the Kiplinger website, Newsmax, and Physician’s Money Digest.

More information, including updated interest rates from dozens of insurers, is available at or (800) 239-0356.


Henry Stimpson
Stimpson Communications

SOURCE: AnnuityAdvantage

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