Minimum Required Distribution

[donrevilo]

What is the name of your state (only U.S. law)? New York

I am 78. I would like to take all money out of a tax deferred account on January 1 2010. The amount is more than enough to meet my MRD for the year (2010). I would then like to buy an annuity with the proceeds on the same day. Will this meet my minumum distribution requirement even though I reinvest the proceeds?

 

[anteater]

Not intending to kick of another debate on the wisdom or lack thereof of purchasing annuities...

But why are you doing this?

You can take as large a distribution as you like and do what you like with the funds. But that distribution is going to be taxable income (unless there is some basis in the tax deferred account).

 

[efflandt]

You better make sure you know how much federal and state income tax you would owe (above any withholding from the distribution) before you put it somewhere where you cannot get at it (but the IRS might be able to). With progressive tax rates, the more you pull out per year, the higher "percentage" of income tax you pay. So for example if you pull out more than a couple hundred thou, you pay a higher tax rate than if you pull out $50k/year.

I heard NY taxes retirement contributions (or is that just for IRA's?). But I read somewhere that they may also tax anything more than $20,000 annual distributions, so some could end up state taxed twice. I guess that is why so many New Yorkers retire to Florida (no state income tax).

So make sure you have a good plan and know all the consequences before you discover too late that you made a huge mistake.