Annuities are subject to required minimum distributions only when they sit inside a pre-tax retirement account like a traditional IRA, 401(k), or 403(b). An annuity you bought directly from an insurance company with after-tax money is not subject to RMDs during your lifetime, and neither is an annuity held inside a Roth IRA or a designated Roth account. The rule follows the tax wrapper, not the annuity contract itself.
The Line That Decides It: Qualified vs. Non-Qualified
A qualified annuity is one held inside a tax-advantaged retirement vehicle. The money went in pre-tax, grew tax-deferred, and the IRS eventually wants its share. That eventual reckoning is the RMD.
A non-qualified annuity is a contract purchased outside any retirement plan, using dollars you already paid income tax on. Earnings still grow tax-deferred, but because the principal was already taxed, no age-based rule forces you to start withdrawing. You can leave the contract alone during your lifetime if you want to.
Roth accounts sit in a third category. Annuities inside a Roth IRA have never been subject to lifetime RMDs, and under the SECURE 2.0 Act the same is now true for designated Roth accounts inside 401(k) and 403(b) plans starting in 2024.1Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
How the RMD Works When Your Annuity Is in a Traditional IRA or 401(k)
If your annuity is inside a traditional IRA or similar qualified account, its value counts toward the account balance the IRS uses to figure your RMD. The formula takes your combined balance as of December 31 of the prior year and divides it by a life expectancy factor from the Uniform Lifetime Table. The result is the dollar amount you must withdraw by December 31 of the current year.2Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs)
One situation calls for a different table. If your sole beneficiary is a spouse more than 10 years younger than you, use the Joint Life and Last Survivor Expectancy Table, which produces a smaller RMD.3Internal Revenue Service. Publication 590-B – Distributions From Individual Retirement Arrangements (IRAs)
For a variable annuity in a qualified account, the fair market value is simply the current account balance. For a fixed annuity, the insurer reports the contract’s accumulation value or the actuarial present value of future payments, depending on the contract’s status.
When You Have to Start
Your first RMD is due for the year you turn 73. You can delay that very first distribution until April 1 of the following year, but doing so means two RMDs land in the same calendar year, which can push you into a higher tax bracket. Most people take the first RMD in the year they actually turn 73 to avoid the doubling.1Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
Which Account You Can Pull From
You calculate the RMD for each traditional IRA separately, but you can withdraw the total from any one IRA or split it across several. So if one IRA holds an illiquid annuity with surrender charges and another holds a brokerage account, you can pull the entire IRA RMD from the brokerage account.
401(k) plans work differently. Each plan’s RMD must come out of that specific plan. You cannot satisfy a 401(k) RMD from an IRA, or vice versa. Multiple 403(b) accounts can be aggregated like IRAs, but you still cannot cross account types.4Internal Revenue Service. RMD Comparison Chart (IRAs vs. Defined Contribution Plans)
When Annuitized Payments Count as the RMD
Once a qualified annuity is annuitized, meaning converted from an accumulation account into a stream of periodic payments, those payments can satisfy the RMD requirement automatically. No separate calculation, no Uniform Lifetime Table lookup each year. The insurer’s payment stream is the RMD.
For that to work, the payments have to meet conditions set out in Treasury regulations. They must be paid at least annually, must be nonincreasing (with limited exceptions for cost-of-living adjustments and certain other permitted increases), and must be structured to last for the owner’s life, the joint lives of the owner and a beneficiary, or a period certain that does not exceed the applicable life expectancy.5eCFR. 26 CFR 1.401(a)(9)-6 – Required Minimum Distributions for Defined Benefit Plans and Annuity Contracts If the contract terms fit, the compliance burden effectively shifts from you to the insurance company.
Non-Qualified Annuities: No Age Trigger, but Watch the Tax Rule
Because you already paid tax on the money used to buy a non-qualified annuity, the IRS does not require you to start withdrawals at any particular age. No age 73 trigger applies. The contract can keep compounding tax-deferred for as long as you live.
When you do take money out during the accumulation phase, earnings come out first under a last-in, first-out rule. Every dollar withdrawn is treated as taxable earnings until you have pulled out all the gains. Only after that do withdrawals start coming from your original principal, which is tax-free.6Internal Revenue Service. Publication 575 (2025), Pension and Annuity Income Take earnings before age 59½ and you owe a 10% early withdrawal penalty on the taxable portion, on top of ordinary income tax.
Once you annuitize the contract, each payment is split between a taxable earnings portion and a tax-free return of principal using an exclusion ratio the IRS calculates from your investment and expected payout period.
A boundary worth naming: non-qualified annuities have their own distribution rules at the owner’s death under Internal Revenue Code section 72. Those rules are separate from qualified-plan RMDs and kick in only after the owner dies; they do not create any lifetime withdrawal requirement.7Office of the Law Revision Counsel. 26 U.S. Code 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts
Using a QLAC to Shrink Your RMD
A qualified longevity annuity contract is a deferred annuity built for qualified retirement accounts. You use part of your IRA or 401(k) balance to buy a contract that does not begin paying until a later date, up to age 85. The premium is excluded from the account balance used to compute your RMD, so your annual required withdrawal drops and more of the account keeps growing tax-deferred.
The maximum QLAC premium is $210,000 for 2026.8Internal Revenue Service. 2026 Amounts Relating to Retirement Plans and IRAs, as Adjusted for Changes in Cost-of-Living The SECURE 2.0 Act removed the older 25%-of-balance cap, so the dollar limit is now the only constraint. Once the QLAC begins paying, the payments are taxable income and must satisfy the distribution requirements like any other qualified annuity payout.
What Happens If You Miss an RMD
Miss the December 31 deadline and the IRS imposes a 25% excise tax on the shortfall, meaning the difference between what you should have taken and what you actually withdrew. Correct the mistake within two years by taking the missed distribution and the penalty drops to 10%.1Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
The IRS can waive the penalty entirely if you show the shortfall was due to reasonable error and you are taking steps to fix it. File Form 5329 with a written explanation of what went wrong and how you corrected it. Serious illness or an administrative error by a plan custodian tends to get favorable treatment.9Internal Revenue Service. Instructions for Form 5329 (2025) – Waiver of Tax for Reasonable Cause
The penalty applies regardless of whether the underlying asset is an annuity. Contract illiquidity is not a defense; the tax code does not care about surrender periods.
Surrender Charges When You Need the Cash
Many deferred annuities impose surrender charges in the contract’s early years if you withdraw more than a set percentage of the account value. That collides with the RMD requirement. Most insurers waive surrender charges on the portion of a withdrawal needed to satisfy an RMD, even when that amount exceeds the contract’s standard free-withdrawal allowance. This is industry practice rather than a legal requirement, so read the contract before assuming the waiver applies.
If the annuity sits in an IRA and you also hold other IRAs, the aggregation rules give you room to maneuver. Calculate the RMD attributable to the annuity IRA, then pull the actual cash from a different IRA holding more liquid assets. The IRS does not care which IRA the money comes from, as long as the total meets the combined requirement.4Internal Revenue Service. RMD Comparison Chart (IRAs vs. Defined Contribution Plans) A 401(k) annuity does not get that flexibility; the withdrawal has to come from that specific plan.