R: Regulate
RMD rules are complex. The 50% penalty for not complying is significant. However, you can regulate your RMDs (bring order, method, or uniformity to RMDs) with a “fix it and forget it” action plan by utilizing the automatic payouts of a single premium immediate annuity (SPIA).
Action plan: fix it and forget it with a SPIA
Different rules apply to funds in IRAs and defined contribution plans that are annuitized. The IRS generally considers the purchase of a SPIA to satisfy RMD obligations if the annuity is not payable over a period extending beyond the life expectancy of the IRA owner (and, if applicable, designated beneficiary) and meets certain other requirements. Annual calculations are not required.
However, the annuity payout will only satisfy the RMD rules for the funds in the IRA annuity. The income payouts cannot be used to satisfy RMDs for non-annuitized IRA funds in any year other than the year of the transfer.
We will discuss the second key to RMD here.