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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

You ask interesting questions.  In order to correctly answer your question, you would need to know what the required minimum distributions (RMD) are going to be regardless of how they are distributed.  In a typical investment account, the value is based on your age and the account value at the end of the previous calendar year.  Each year the tables decrease the life expectancy.  If your account value increased in the previous year, you might have a greater amount to withdraw for example.  

You need to know the income value of your distribution from your immediate annuity to know whether it would satisfy the requirement.  One suggestion is to consider a different type of annuity such as an indexed annuity that might provide you with more flexibility.  In the event you should predecease the total amount put into your immediate annuity, the insurance company gets the balance.  In other types of annuities, such as indexed annuities and variable annuities, then if you should predecease before using all of the deposit amount, your heirs would receive the remainder.  In both cases, one of the big advantages of annuities is that you can create your own pension plan that you will never outlive.

There is no tax when you move one retirement account into another retirement account.  All retirement accounts are taxed as ordinary income when they are withdrawn regardless of how they are invested unless they are in a Roth account.

January 2019
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