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Allianz Addresses RMD Challenges


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Required minimum distributions, or RMDs, activate for retirement account holders at the age of 70 ½, and for those who don’t need the money that the government requires them to take, they can be problematic. A solution to this unavoidable conundrum isn’t always obvious, but one insurer is trying to fix that. 

RMDs mandate that retirement account holders, aged 70 ½ and older, withdraw and pay tax on a percentage of an individual retirement account or 401(l). According to a recent article from InsuranceNewsNet, Allianz Life Insurance Co. of North America is launching an indexed annuity targeted specifically at this demographic. Allianz annuity owners who would rather keep their assets invested will have the option of automatically rolling the RMD payment into a second annuity, withholding the associated tax. The company will also pay a 25% bonus on funds in the second annuity, as an added bonus.

“I’ve never heard of anyone else doing this,” said Sheryl Moore, head of consulting firm moore Market Intelligence. “The No. 1 complaint I hear from annuity purchasers is, ‘I don’t want my RMD; why do I have to take it if I don’t want it?’”

The number of 50-69 year-olds taking RMDs is projected to increase by more than 27 million people over the next 20 years. This type of product could ultimately be a way for insurers to combat the effects of the so-called gray wave. A significant problem for financial institutions could arise given that up to $10 trillion in assets will be subject to mandatory withdrawals 2035, nearly a third of the $28.2 trillion held in all retirement accounts.

The insurers who solve this problem by creating “investor-friendly solutions may win the battle of asset retention,” according to a BNY Mellon report.

“We’re still at the front end of the boomer wave,” said Matt Gray, senior vice president of product innovation at Allianz Life, which sold the most indexed annuities in 2018. “I think you’ll see more of this type of solution, and more from us as well.

Legacy By Design, the new Allianz product, is two separate annuity contracts: the initial tax-qualified indexed annuity and a non-qualified indexed annuity, which receives the RMD rollover, net of taxes. Purchasers are required to fill out one application and elect Allianz to automatically withhold RMD taxes or transfer the tax for the customer to pay directly. Allianz pays a 25% bonus in the form of a death benefit for heirs.

For more information on this, or other annuity products, contact AnnuityFYI. Visit our website, www.annuityfyi.com, call us at 1-866-223-2121, or send us an email at support@annuityfyi.com.

Written by Rachel Summit

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