The following may be useful for those who are not aware of it, and also if I'm misinterpreting something I'd appreciate knowing that.
I have a traditional IRA with Vanguard. In 2024 I bought a single-payment annuity from New York Life via direct rollover from that Vanguard IRA, with distributions to start June 2025. The contract specifies a level monthly payment, for my lifetime only. A couple of days ago I got a statement from New York Life showing this year's anticipated distribution, the Fair Market Value of the annuity on 31 Dec 2024, with this interesting statement:
"As a result of the SECURE 2.0 Act of 2022, you might be able to apply your income benefits towards satisfying the RMD of other non-annuitized IRAs, potentially reducing your overall RMD obligation for the year."
Pub 590-B seems not to have been updated to match the
2022 Secure Act, and I couldn't find anything helpful on the IRS site. But there are plenty of articles on the Web, of which the clearest is
"[Before Secure 2.0] ... For the other (non-annuitized) funds, RMDs are calculated under the usual rule (prior- year 12/31 account balance divided by the owner's life expectancy factor). But for the annuitized part, the annuity payments received during a year are considered the RMD for that year. "This amount of total payments is typically much larger than the RMD that would be required if the annuitized part was determined under the usual RMD method. However, before SECURE 2.0, this overage couldn't be credited against the RMD for the other IRA funds. In other words, there were two separate RMDs - one for the annuitized portion and one for the remaining funds - that couldn't be aggregated.
"SECURE 2.0 changes this rule by allowing RMDs for the annualized [sic -- a typo for "annuitized"] IRA and the other (non-annuitized) IRA funds to be aggregated. To do this, the prior-year 12/31 value of the annuitized IRA and the other funds are combined, and this sum is divided by the applicable life expectancy factor. This becomes the total RMD for the year. The amount of annual annuity payments are then subtracted from the total RMD to determine how much of the total RMD remains and must be taken from the other IRA accounts."
There's a clear numerical example at
Is that all correct? Like many, my annuity will be paying me considerably more than the RMD of the annuity part of my portfolio. It would sure be nice to apply that excess against the RMD I must take from my Vanguard account.