Dear Senior Living Adviser, 

My mother began a single premium deferred annuity policy in 1994 when she was 71 and has not taken any distributions. The policy has a maturity date in 2018, which, according to the policy, is when payments would begin. We just noticed that she has been receiving notices the past few years from the insurance company stating that the IRS requires an RMD when the owner reaches age 70 1/2. She also receives a Form 5498 with an RMD amount. Should she have started taking RMDs as soon as she began the policy?

Thanks. 

- Baffled Bill

Dear Bill,

A single premium deferred annuity policy can be a way for seniors to insure against longevity risk, the risk of outliving their retirement savings. It's common for these policies to start making payments when the annuitant reaches a particular age.

Required minimum distributions, or RMDs, come into play for annuities purchased in qualified retirement accounts such as an IRA. So the type of account that funded the purchase determines whether there are RMDs from a deferred annuity. Her receiving IRS Form 5498, IRA Contribution Information, would appear to indicate that the annuity is held in a qualified account. If that's the case, she should work with a tax professional to review her situation.

Try out Bankrate's annuity calculator.

If the annuity is held in a nonqualified account, meaning it was purchased with after-tax dollars, the annuity contract will specify when the annuitant needs to start taking annuity payments. That may be at a specific date, as it appears to be in your mother's case, or at death.

On the horizon is a qualified longevity annuity contract where the deferred fixed annuity will be purchased in a qualified retirement account with no RMDs. There will be size limitations on the accounts.

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