The Retirement and IRA Show

Jim and Chris discuss listener emails on Social Security earnings limits, and two emails relating to using annuities for LTC planning.

(13:00) — A listener asks whether income from selling NSO stock counts as earned income for Social Security, potentially triggering the earnings limit before full retirement age.

(21:00) — George asks about using a 1035 exchange to move variable annuities with guaranteed living benefits into a product offering long-term care benefits, and wants help weighing the tradeoffs of this approach.

(49:45) — The guys help a listener think through annuity planning to fund future long-term care costs for in-laws, including whether to use one joint annuity or two individual annuities and where to find SPIA quotes.

The post Social Security, Annuities for LTC Planning: Q&A #2624 appeared first on The Retirement and IRA Show.

Chris’s Summary:

Jim and I continue our discussion on annuity basics before turning to a listener’s email centered on forced annuitization, a maturity date built into every annuity contract requiring annuitization or full distribution by a set age. A listener’s mother faces this deadline at 95 with a variable annuity that grew over 10x, creating a substantial IRD (Income in Respect of a Decedent) tax burden. We consider options including period-certain annuitization, adding a younger co-annuitant, a 1035 exchange, and charitable strategies.

Jim’s “Pithy” Summary:

Chris and I are picking back up where we left off last week on the basics of annuities, and we take a hard look at the licensing mess on both sides of the industry: insurance agents selling products tied to indexes they’re not licensed to discuss, and investment advisors selling annuities through wholesalers without ever getting an insurance license. We also get into why AI is becoming the great equalizer for consumers, and how a 2005 class action lawsuit built on a complete misunderstanding of annuity maturity dates sets up the real conversation.

That real conversation is a listener’s email about forced annuitization. His mother bought a variable annuity in 2002 with money she didn’t need to cover her Minimum Dignity Floor and invested it aggressively. Set it and forget it. Now, decades later, a deadline is closing in, and what looked like a smart, tax-deferred decision has turned into a significant IRD problem with no clean exit. The listener has been chipping away at it, but the math isn’t cooperating.

There are options, some involving the existing contract, some involving moving it entirely, and at least one that surprised even me when I dug back through my notes. None of them are perfect, but the worst move may be the one he’s already making. We’ll get into all of it.

The post Understanding Forced Annuitization: EDU #2623 appeared first on The Retirement and IRA Show.

Jim and Chris discuss listener emails on whether Social Security should be compared to an annuity, Rule of 55 distribution rules, using period-certain annuities during the delay period, QLAC timing and taxes, and using a SPIA for Minimum Dignity Floor coverage.

(5:20) The guys address a listener’s objection to describing Social Security as an annuity and whether that comparison is accurate.

(32:00) A listener seeks clarification on Rule of 55 distributions after receiving conflicting information about whether plan-specific rules matter.

(38:45) Georgette asks whether a 10-year period before her mortgage is paid off can be treated like a delay period and covered with a period-certain annuity.

(51:30) Jim and Chris answer a question about whether QLACs can be purchased for a spouse from an IRA, how QLAC timing can be structured, and how payments are taxed.

(1:13:45) George wonders whether relying on excess RMDs or purchasing a qualified second-and-survivor SPIA from IRA funds is a better way to support long-term MDF coverage.

The post Social Security, Rule of 55, QLAC Timing, SPIAs: Q&A #2623 appeared first on The Retirement and IRA Show.

Chris’s Summary

Jim and I tackle annuity basics to start off another National Annuity Awareness Month. We cover what annuities are as insurance contracts, the four parties to a contract, the accumulation and distribution phases, and the key differences among the major annuity types. We also touch on tax deferral rules, LIFO treatment, and the historical and industry context behind why annuities remain so widely misunderstood.

Jim’s “Pithy” Summary 

Chris and I use National Annuity Awareness Month to get back to annuity basics. I have a book in my office, Lee Welling Squier’s Old Age Dependency in the United States, written in 1912, before Social Security existed, that begins by asking why people don’t use annuities to help provide against want in old age. That question stuck with me because I was taught early in this industry that annuities were horrible, while pensions were wonderful. But, if a pension was one leg of the old three-legged stool, and the 401(k) helped pull that leg out, then maybe we ought to at least understand the product that can mimic some of that pension-like income for retirees who need it. Not love it. Not hate it. Just understand it.

So, we start with the basics: what you are buying, who is making the promise, who controls the contract, whose life the payment is based on, how the accumulation phase works, and when/if the thing you own turns into a stream of income all matter. The word “annuity” covers a lot of very different vehicles. Some are plain and straightforward. Some are complex, with riders, caps, participation rates, and spreads. Some may be useful in the right circumstances. Others may be costly, confusing, or misapplied. And if you do not understand which type of annuity you are looking at, it is easy to use the wrong one in the wrong place.

The post Annuity Basics: EDU #2622 appeared first on The Retirement and IRA Show.

Jim and Chris discuss listener emails on Social Security survivor and ex-spouse benefits, using annuity income to satisfy RMDs, and annuity laddering strategies for both SPIAs and DIAs and MYGAs.

(6:30) George writes in about a cousin who turns 62 in November 2026 and whose ex-spouse recently passed away — he wants to know what survivor and ex-spouse Social Security claiming options may be available.

(19:45) A listener asks whether annuity income payments from a qualified annuity can be used to satisfy the RMD requirement on a separate IRA, potentially eliminating the need to take distributions from the IRA altogether.

43:15) The guys hear from a long-term buy-and-hold investor at the start of his transition from accumulation to decumulation who is drawn to the idea of purchasing SPIAs or DIAs in multiple chunks rather than a single lump sum and is curious about tradeoffs as well as how to apply a dollar-cost averaging mindset to annuity income.

(1:01:00) Jim and Chris take a question from a listener about 2.5 years from retirement who is considering laddering MYGAs through his 401(k) and wants to know whether the yield advantage of A-rated carriers is worth the added risk compared to sticking with A+ or higher, and whether CD laddering might be a simpler alternative.

The post Social Security, Annuity RMDs, Annuity Laddering: Q&A #2622 appeared first on The Retirement and IRA Show.