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Would converting my entire 403(b) into immediate annuities satisfy required minimum distributions?

I have not yet retired. I am considering purchasing an immediate annuity using all the funds in my 403(b) plan upon retirement. Would the annuity distributions satisfy required minimum distributions? How will placing the entire amount in an annuity be taxed? How will the monthly payments be taxed?

Financial Planning, Retirement, Annuities, Taxes
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January 2019

Yes, that would satisfy your RMD requirements.  I am assuming all 403b money is pretax and there is no Roth component.  All distributions will be subject to marginal taxes.  There are several big considerations.

1. You lose the ability to ever tap into the account for more funds is you need money above the distribution.

2. Over time, inflation will eat into this fixed payment for purchasing power.

3. Typically your heirs will receive nothing unless you pick a lower payment that has continuation of benefits.

If this is the bulk of your retirement dollars, think twice before putting it all in one contract where you lock yourself into a situation you can't modify.

January 2019
January 2019
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January 2019