Question about moving qualified funds into an annuity ?

[scagnt83]

I did not realize "Timed and Observed Get Up and Go" was an ADL test.

Was it a misunderstanding of what to do during the test? Or was it truly an inability to perform that test during the time allowed?

In the past, ive had some LTCI cases where the person performing the test just didnt explain it properly for the client. We had them retested and got it through.

So stuff like that is not always a case killer.

 

[scagnt83]

Caveat, not an agent.

What is (are) the relevant conceptual approach (es) for converting a stream of income to a stream of income?

Whats wrong with the first stream of income? What do you need to make a 2nd stream of income for? What is the goal you are trying to achieve??

No way to give you a proper answer without knowing the circumstances. Ask vague questions you get vague responses. Concepts only go so far and we could list 10 possible concepts that fit that description, but only 1 or 2 will likely apply to your situation. Details matter immensely in situations like this.

 

[LostDollar]

Why? It seems you have a disconnect somewhere with this.

Caveat, not an agent.

No disconnect.

I just looked at pub 590b and see that I was partly wrong because I had not looked at table iii prior to making that comment.

Tables I and II utimately go to a factor of 1.
Table III does not.

I think Table 1 (and its calculation methods) might be where the effect of a factor of 1 zeroing an IRA will come into play for practical purposes for (many?) people. The voya charts do show this.

 

[Tahoe Ray]

I did not realize "Timed and Observed Get Up and Go" was an ADL test.

It technically isn't but it can certainly be related to an ADL called "transferring".

What is (are) the relevant conceptual approach (es) for converting a stream of income to a stream of income?

I'm sorry but I don't understand what this means.

I disagree with that statement.

If you die before or around life expectancy, RMDs should not deplete your entire IRA (or even a large portion of it) if you're invested properly.

If you live to 100-something and have to start ripping 15-20% of your IRA out each year, then I guess it would deplete your IRA balance. But, you don't actually have to spend the money either so you could put it in a NQ brokerage account and make a lot of your taxes back.

Tables I and II utimately go to a factor of 1.

Yeah, but you'll have been dead for 30 years by then (not directed at you, but you have to be ridiculously old for that to happen).

 

[LostDollar]

Yeah, but you'll have been dead for 30 years by then (not directed at you, but you have to be ridiculously old for that to happen).

I agree for Table II, but I'm not seeing that in my very limited experience with Table I.

 

[Allen Trent]

(Caveat, not an agent.)

I disagree with that statement.

You can disagree, but it doesn't change the fact that it is true for IRAs (exception would be inherited IRA needing to be emptied by 10th year)

 

[Allen Trent]

I agree for Table II, but I'm not seeing that in my very limited experience with Table I.

Sure, but that really isn't the IRA owners IRA. I believe that is for inherited IRAs which theoretically have no legal "right" to expect anything better than having to empty the entire balance in 1 year. In essence, Table 1 is somewhat of a special exemption or loophole to permit a beneficiary to slowly inherit something.

I personally inherited such an IRA, but I chose instead to disclaim it & allow it to flow to my 4 kids. So, my 4 kids now have pre-2020 secure act Inherited IRAs that will allow them to keep the accounts for the next 57-64 years by taking just the RMD. Think about that. My mom deposited money into 401k from 1990 to 2015 & my kids will still have those accounts open until potentially 2085 when my mother would have been 142 years old.

 

[LostDollar]

You can disagree, but it doesn't change the fact that it is true for IRAs (exception would be inherited IRA needing to be emptied by 10th year)

That also is not a true statement, unless a factor of 1 in an RMD table does NOT mean the IRA will zero.

Table I and table II both go to factors of 1.

As Tahoe Ray has pointed out, when you have an un-ridicuously old life span, for practical purposes, a table II IRA won't zero out.

It is a different story for a Table I IRA-not just the newer situations with a 10 year distribution requirement.

(The 590 publication tables are still the old ones)

A 20 year old with a Table I IRA has a factor of 63 which means their IRA will zero by 83.

A 75 year old with a Table I IRA has a factor of 13.4, meaning their IRA will zero between 88 and 89.

The new tables bump those up by something.

Those are not ridiculously old ages if you assume continued political and financial stability and continued availability of modern type medical treatment, so Table I IRA's do zero.

 

[LostDollar]

Sure, but that really isn't the IRA owners IRA. I believe that is for inherited IRAs which theoretically have no legal "right" to expect anything better than having to empty the entire balance in 1 year. In essence, Table 1 is somewhat of a special exemption or loophole to permit a beneficiary to slowly inherit something.

It seems to me like they inherited it all at once. It is just encumbered by a tax lien. (A variable fee like the fees to get those accelerated annuity benefits. )

 

[Allen Trent]

a factor of 1 in an RMD table does NOT mean the IRA will zero

Being forced to take any or the final amount out of the IRA for taxation purposes doesn't equate to the money being gone. There is no law requiring it to be spent. The law merely requires you to remove it from the IRA & settle up with the IRS & paying taxes that have been deferred for up to 5-9 decades while the money was in the IRA.

In reality, the vast majority of people will have had to empty the IRA much, much earlier than RMDs require for 1 of 2 reasons. 1. To live on as they hadn't saved enough to cover living expenses especially ever increasing medical costs in retirement 2. To pay for assisted living/nursing home costs.

Keep in mind, just 2 decades ago, the RMD tables started by requiring a 70 year old to take a factor of 16. It then changed each year by a factor of 1 & every IRA account was forced to be emptied at 86. So today's tables for a personally owned or spousal inherited IRA table is much more tax friendly to the account owner by starting with life Expectancy factors in the high 20s & changing by a partial number pushing the final factor of 1 out to when someone is over age 120. The 2022 charts have a factor of 2 at age 120 & the chart ends. So, the old charts had a factor of 1 at age 87 & today never go to 1.

Again, not talking about inherited accounts as those are not something the person bought or owned & any ability to delay tax more than 1 year is a blessing when you inherit someone else's money