Thursday, October 6, 2011

Roth Conversion Deferral, Annuities and IRAs Highlight Mailbag

This week's Slott Report Mailbag answers questions about reporting Roth conversion income deferred to 2011 and the process involving annuities, required minimum distributions and IRAs. As always, we stress the importance of working with a competent, educated financial advisor to keep your retirement nest egg safe and secure. Find out at this link.


In 2010, the amount of the Roth conversion was shown on line 15a and $0 on line 15b if the two-year election was chosen. So will the reverse be true in 2011? Line 15a will be $0 and the taxable amount will be 1/2 of the amount shown in 2010? Thus there is a taxable amount of a zero distribution, which seems strange grammatically and mathematically.  My IRA distribution will be $0 and the taxable amount will be $15,000. Thank you.

Eben Dale

IRS has not released instructions yet for reporting Roth conversion income deferred to 2011. The amount deferred was shown on Form 8606, so it is possible that the 8606 will be used in 2011 and 2012 to continue tracking the deferred amounts.


I have used an allocation type system for my IRA in retirement. With a SPIA (Simple Premium Immediate Annuity), fixed annuity and then mutual fund as the three allocations under my IRA. I have used the SPIA to take the income/RMD (required minimum distribution) from my allocation. Recently I heard that SPIAs do not count as a full RMD if you have other allocations. Is this true? Do I need to take RMDs from my two other allocations as well as the SPIA even if the SPIA payment is more than my RMD from the total of the three? Thank you.

There is no consensus of opinion on this question. The insurance companies generally tell you that the distribution from any annuitized annuity will satisfy the distribution from that annuity only. For rollovers, the tax code says that substantially equal payments made over 10 years or more are not eligible for rollover just as RMDs are not eligible. That leaves one to assume that substantially equal payments made for a period of less than 10 years would be eligible for rollover, as long as they are not an RMD from that account. If they are eligible for rollover, they can also be used to satisfy RMDs from IRAs other than the SPIA. IRS has not issued any guidance or addressed this issue in its publications.

By Marvin Rotenberg and Jared Trexler
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