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Annuity RMDs: how Required Minimum Distributions work.

Required Minimum Distributions (RMDs) are the IRS's way of finally collecting income tax on the money you've been deferring inside retirement accounts. How RMDs apply to annuities depends on whether the annuity is qualified or non-qualified — and whether it's still accumulating or already paying income.

Qualified vs non-qualified annuities and RMDs

Qualified annuities are owned inside an IRA, 401(k), or similar tax-deferred retirement account. They are subject to RMDs beginning at age 73 (rising to 75 in 2033 under SECURE 2.0).

Non-qualified annuities are purchased with after-tax dollars outside of a retirement account. They are not subject to RMDs — you can let them grow tax-deferred for as long as you like.

RMDs on an annuity in accumulation

If your IRA annuity hasn't been annuitized — meaning it's still building cash value — the prior year's December 31 fair market value is added to your other IRA balances and used to calculate a single RMD across all your IRAs. You can take that RMD from any IRA you own, including the annuity (subject to its free withdrawal provision).

RMDs on an annuitized contract

Once an IRA annuity is annuitized — converted into a stream of scheduled lifetime payments — the annual payments themselves satisfy the RMD for that contract. The IRS treats annuitization as a permanent election that automatically meets the distribution requirement, and the annuitized contract is no longer included in your other IRAs' RMD calculation.

Using annuities to reduce RMDs

  • QLAC: Move up to $200,000 from an IRA into a Qualified Longevity Annuity Contract to exclude that amount from RMDs until age 85. Read more in our QLAC guide.
  • Annuitization: Convert IRA cash into lifetime income earlier than 73 to smooth taxable income and avoid bunching distributions.
  • Roth conversions before 73: Move money from IRA to Roth before RMDs begin to permanently shrink the RMD base.

Frequently asked questions

Do annuities have Required Minimum Distributions?
Only qualified annuities — those held inside a traditional IRA, 401(k), or other tax-deferred retirement account — are subject to RMDs starting at age 73 (SECURE 2.0). Non-qualified annuities purchased with after-tax money are not subject to RMDs.
How do RMDs work with a qualified annuity?
If your IRA annuity is still in the accumulation phase, its prior-year December 31 fair market value is included in your total IRA balance for RMD calculation. Once an annuity is annuitized (paying scheduled lifetime income), the annuity payments themselves satisfy the RMD for that contract — you don't have to take an additional withdrawal.
Can an annuity reduce my RMDs?
Yes, in two ways. (1) A QLAC excludes up to $200,000 from your RMD-calculation balance until income begins (as late as age 85). (2) Annuitizing an IRA annuity for lifetime income converts that portion of your IRA into a stream that automatically satisfies its own RMD requirement.
What is the RMD age in 2026?
The Required Beginning Date is April 1 of the year after you turn 73. Starting in 2033, the SECURE 2.0 Act raises the RMD age to 75 for those born in 1960 or later.
What is the penalty for missing an RMD?
Under SECURE 2.0, the penalty for failing to take an RMD was reduced from 50% to 25% of the missed amount, and to 10% if corrected within a short window. Still, missing an RMD is one of the costliest tax mistakes a retiree can make.

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