Once an owner of an IRA reaches ago 70 1/2 the IRS requires funds to begin to be withdrawn. These funds are taxed at ordinary income rates. New rules are now in place that allow for these funds to be removed under RMD (required minimum deposit) beginning at age 70 1/2 and ending at age 115. The change increased the time that funds can be held in the IRA from age 90 to age 115 which means that since the time has increased for mandatory withdrawal the amount you are forced to removed each year will be less. The benefit is you will be allowed to keep your funds in the IRA a much longer time both for your use and your heirs use.
Numerous investment options exist for an IRA and the decision of where those funds are invested depends entirely on the goals of the IRA owner. If the funds in an IRA are not specifically needed, then stocks, bonds or mutual funds can be an acceptable option. However, if the funds are important to the retirement planning of the IRA owner a better choice may be to allow an insurance company to hold the funds in an annuity account.
The reason an annuity makes sense for an IRA is an annuity can provide income for anytime period even including lifetime. If the funds are necessary for retirement security, simply allow the insurance company to provide you a monthly check for your lifetime. You may also include a spouse in the calculation so income will continue in the event of a pre-mature death. An IRA Annuity can also remove stress in making decisions to managing your funds.
An option used often is “laddering” several annuities in the same IRA account, using one for income for a shorter period of time and allowing the others to increase in value to be used in a pre-planned order. The advantage of this is when the laddered annuities are accessed, the IRA owner is older and since income is based on age, the income from the future annuities may be higher than the original annuity.
Other possible options are available to IRA owners who have attained this important benchmark of age 70 ½. For those who desire to leave most of the funds held in the qualified annuity for the benefit of heirs, one option is the stretch individual retirement account. Upon death of the policy holder, assets held in the annuity can pass to children as named beneficiaries who then can “stretch” distributions over their lifetimes.
This concept allows for the tax liability to be spread over numerous lifetimes and over many years. IRA planning can be complicated but can also be essential in planning for a successful retirement.
As with all important decisions make certain you fully understand all aspects of your decision and it is always suggested you seek competent legal and tax advice before making any important decision.