A required minimum distribution (RMD) is the minimum amount the IRS requires you to withdraw from qualified retirement accounts each year starting at age 73. RMDs apply to traditional IRAs, 401(k)s, 403(b)s, and qualified annuities held inside these accounts.
RMDs and Annuities
If your MYGA is held inside a traditional IRA, you must take RMDs even though the money is in an annuity contract. Most carriers accommodate this through the penalty-free withdrawal provision. Some contracts are specifically designed as “RMD-friendly,” meaning the annual free withdrawal percentage is high enough to cover your required distribution.
RMDs do not apply to non-qualified annuities or Roth IRAs (during the owner’s lifetime).
Penalty for Missing RMDs
If you fail to take your full RMD, the IRS imposes a 25% excise tax on the amount not distributed (reduced from the previous 50% penalty under SECURE 2.0).