Annuity RMD Rules: Deadlines, QLACs, and Inherited Contracts

Annuity RMD rules apply only to annuities held inside qualified retirement plans such as traditional IRAs, SEP and SIMPLE IRAs, 401(k)s, and 403(b)s. If your annuity sits in one of those accounts, you generally must begin taking required minimum distributions for the year you turn 73, and missing one triggers a 25% excise tax on the shortfall.¹ Annuities bought with after-tax dollars outside a retirement plan are not subject to RMDs at all, and neither are Roth IRA annuities or, since 2024, Roth 401(k) and Roth 403(b) annuities during the owner’s lifetime.²

Which Annuities the Rules Cover

The RMD regime attaches to the account, not the annuity itself. Any annuity held in a plan under Internal Revenue Code sections 401(a), 403(a), 403(b), 408(a), or 408(b) is a qualified annuity and falls under the rules.¹ That covers traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k)s, 403(b)s, and similar employer plans.

Two categories sit outside the rules. Non-qualified annuities, purchased with after-tax dollars in a personal account, grow tax-deferred but never became part of a qualified plan, so you decide when and whether to take distributions. Roth annuities are also exempt during the owner’s lifetime, including Roth 401(k) and Roth 403(b) annuities under the SECURE 2.0 change that took effect in 2024.²

When the First RMD Is Due

You must start taking RMDs for the year you turn 73.² Under SECURE 2.0, the starting age rises to 75 for people who turn 74 after December 31, 2032.

The first year comes with a special deadline. You can delay your initial RMD until April 1 of the year after you turn 73. Every RMD after that must be out by December 31. The April 1 option looks like a break, but if you use it, you’ll take two RMDs in the same tax year: the delayed first one and the current year’s regular one. That doubled income can push you into a higher bracket or bump up Medicare premiums. Taking the first RMD in the year you turn 73 usually works out better.²

Calculating the RMD on a Qualified Annuity

The method depends on whether the contract is still accumulating or has been converted to a payment stream.

Deferred Annuities Still in Accumulation

For a deferred annuity that has not been annuitized, use the standard formula. Take the contract’s fair market value on December 31 of the prior year and divide by the life expectancy factor from the IRS Uniform Lifetime Table.³ If your spouse is the sole beneficiary and more than 10 years younger, use the Joint Life and Last Survivor Expectancy Table instead, which produces a smaller RMD.

A worked example: a contract worth $100,000 on the prior December 31, for an owner turning 76 this year, gives a Uniform Lifetime divisor of 23.7 and an RMD of $4,219.

Watch for surrender charges. Many deferred annuities limit penalty-free withdrawals during the early years. Most insurers waive surrender charges on withdrawals needed to satisfy an RMD, but not all contracts do. Read the contract before you assume the waiver applies.

Contracts That Have Been Annuitized

Once a qualified annuity is fully annuitized, the payments themselves can satisfy the RMD, and you no longer need to run the fair-market-value calculation for that contract. The payments must be nonincreasing, made at intervals no longer than a year, and spread over your life, the joint lives of you and a beneficiary, or a period that doesn’t exceed your life expectancy.⁴

Nonincreasing has flexibility built in. Cost-of-living adjustments tied to a recognized index like the CPI are allowed, and a fixed-percentage escalator is allowed if it’s under 5% per year.⁴ If a payment schedule fails these requirements, the special treatment falls away and you revert to the standard fair-market-value calculation.

Guaranteed Lifetime Withdrawal Benefits

Some deferred annuities include a rider that guarantees a set annual withdrawal without full annuitization. GLWB withdrawals from a qualified annuity count toward that contract’s RMD. If the guaranteed payment for the year is less than the calculated RMD, you have to take additional withdrawals to close the gap, or the excise tax applies to the shortfall.

QLACs and Shrinking the RMD Base

A qualified longevity annuity contract is a deferred annuity built to start payments late in life. The amount you put into a QLAC is excluded from the account balance used to compute your annual RMDs, which lowers required withdrawals until the QLAC itself begins paying.

The rules are specific. Payments must begin no later than the first day of the month after you turn 85.⁵ Total QLAC premiums across all your retirement accounts cannot exceed $210,000 in 2026.⁶ The contract can’t be variable or indexed, can’t offer a cash surrender value after your required beginning date, and must be designated as a QLAC when issued.

Aggregating RMDs Across Accounts

If you own several retirement accounts, aggregation rules decide whether you can concentrate the withdrawal in one place. You must calculate each account’s RMD separately, but you can add your traditional IRA RMDs together and take the total from any one IRA. The same works for 403(b)s: calculate separately, withdraw from whichever 403(b) you choose.⁷

You cannot cross account types. An IRA withdrawal does not satisfy a 403(b) RMD, and a 403(b) withdrawal does not satisfy an IRA RMD. Each 401(k) plan’s RMD must generally come out of that specific plan.

This matters a lot for annuity owners. If you hold an annuity inside one IRA and a brokerage account inside another IRA, you can take the combined IRA RMD entirely from the brokerage account and leave the annuity untouched. That sidesteps surrender charges and preserves any guarantees tied to the contract value.

Inherited Annuities

The rules for inherited qualified annuities depend on who inherits and when the owner died. The SECURE Act rewrote them for deaths in 2020 and later.

Surviving Spouse as Sole Beneficiary

A sole-beneficiary spouse has the widest set of options. You can treat the annuity as your own and follow the standard RMD schedule based on your age, or take distributions using your own single life expectancy recalculated each year.⁸ If the original owner died before their required beginning date, you can delay distributions until the year the deceased would have turned 73.

Eligible Designated Beneficiaries

Certain non-spouse beneficiaries can stretch distributions over their own life expectancy rather than emptying the account within 10 years. The IRS classifies eligible designated beneficiaries as:

Minor children of the deceased, until they reach the age of majority
Disabled or chronically ill individuals
Beneficiaries not more than 10 years younger than the deceased owner

These beneficiaries keep the stretch treatment that most heirs lost under the SECURE Act.⁹

The 10-Year Rule for Everyone Else

Most non-spouse beneficiaries must empty the inherited account by the end of the 10th year after the year the owner died.⁹ If the owner died on or after their required beginning date, annual RMDs may also be required within that 10-year window. The IRS issued transitional relief under Notice 2022-53 waiving penalties for missed annual distributions in the early years while the final rules were clarified; going forward, expect the annual distribution requirement to apply when the owner had already begun RMDs.

The 10-year rule overrides the payment schedule of an annuitized contract. If an adult child inherits a qualified annuity paying out over 20 years, the account still has to be fully distributed inside the 10-year window.

The Penalty for Missing an RMD

If the amount you take falls short of the RMD, the IRS charges a 25% excise tax on the gap.¹ An RMD of $10,000 with only $4,000 withdrawn produces a $6,000 shortfall and a $1,500 penalty.

You can bring the penalty down to 10% by fixing the mistake within a correction window: withdraw the missed amount and file Form 5329 before the earlier of two years after the penalty accrues or the date the IRS assesses the tax or sends a deficiency notice. The IRS can waive the penalty entirely if you show the shortfall was due to reasonable error and you’re taking steps to correct it.¹

Two mistakes cause most of the trouble. First, forgetting that a 401(k) RMD has to come from that 401(k), not from an IRA. Second, treating a request submitted in late December as done. Annuity distributions can take longer to process than brokerage withdrawals, and a payment that settles in January doesn’t count for the prior year. Confirm the withdrawal has actually posted before December 31.

1
Office of the Law Revision Counsel. 26 U.S. Code 4974 – Excise Tax on Certain Accumulations in Qualified Retirement Plans
2
Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
3
Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs)
4
eCFR. 26 CFR 1.401(a)(9)-6 – Required Minimum Distributions for Defined Benefit Plans and Annuity Contracts
5
Internal Revenue Service. Instructions for Form 1098-Q
6
Internal Revenue Service. 2026 Amounts Relating to Retirement Plans and IRAs, as Adjusted for Changes in Cost-of-Living
7
Internal Revenue Service. RMD Comparison Chart (IRAs vs. Defined Contribution Plans)
8
Internal Revenue Service. Required Minimum Distributions for IRA Beneficiaries
9
Internal Revenue Service. Retirement Topics – Beneficiary