The short version

If you are approaching your early 70s and you own an Annuity, or you are thinking about moving 401(k) or IRA money into one, required minimum distributions (RMDs) are one of the most important rules to understand. An RMD is the minimum amount the federal government requires you to withdraw each year from most pre-tax retirement accounts once you reach a certain age. The government let that money grow tax-deferred for decades, and RMDs are how it eventually collects the tax that was postponed.

Whether RMDs apply to your Annuity comes down to one question: is the Annuity qualified (held inside a traditional IRA or a pre-tax retirement plan) or non-qualified (bought with after-tax money outside a retirement plan)? That single distinction changes almost everything about how RMDs interact with your contract. This guide walks through the current RMD age, the deadlines, the one rule that trips people up the most, and how Fixed and Fixed Indexed Annuities fit into an RMD picture for someone in Charlotte or anywhere in North Carolina.

This article is for education only. It is not investment, tax, or legal advice, and The Jordan Insurance Agency is a licensed independent insurance agency, not a financial planner, investment advisor, or tax preparer. RMD calculations and exceptions depend on your specific accounts, birth year, and situation, so confirm the details with a qualified tax advisor.

What an RMD is, in plain English

A required minimum distribution is the smallest amount you are legally required to take out of certain retirement accounts each year after you reach the applicable age. The rule exists because accounts like traditional IRAs and 401(k)s are funded with pre-tax dollars and grow tax-deferred. You never paid income tax on that money going in, and you have not paid tax on the growth. RMDs force some of it out each year so it finally gets taxed as ordinary income.

A few things to keep straight from the start:

  • RMDs apply to pre-tax (qualified) retirement money — traditional IRAs, and pre-tax employer plans like 401(k)s and 403(b)s.
  • The RMD is a minimum, not a maximum. You can always take out more; you simply cannot take out less than the required amount for that year.
  • The amount you must take is generally based on your account balance at the end of the prior year and your life expectancy under IRS tables. The older you are, the larger the required percentage becomes.
  • Whatever you withdraw to satisfy an RMD is generally taxed as ordinary income in the year you take it.

Because the calculation and any exceptions depend on IRS tables and your own accounts, treat every dollar figure as something your tax advisor confirms for you. Our focus here is how the RMD rules interact with an Annuity, not how to compute your exact number.

The current RMD age: 73 (rising to 75)

Under current federal law, the age at which RMDs begin is 73. You must begin taking RMDs for the year you reach age 73.

The law also has a later step-up built in. The applicable age is 73 for people born from 1951 through 1959, and it rises to 75 for anyone born on or after January 1, 1960. So if you were born in 1960 or later, your RMDs will not begin until you reach age 75. This change came out of the SECURE 2.0 legislation, and your birth year is what determines which age applies to you.

The deadlines that matter

There are two deadlines to keep in mind, and the first one has a special wrinkle:

  • Your first RMD is due by April 1 of the year after the year you reach your applicable age. This is the one exception that lets you delay slightly.
  • Every RMD after the first is due by December 31 of that year.

Here is the catch with that first-year grace period: if you wait until April 1 to take your first RMD, you will end up taking two RMDs in the same calendar year — the delayed first one by April 1, and the second one by December 31. Two taxable distributions in one year can push more of your income into a higher bracket. Many people take the first RMD in the year they turn the applicable age precisely to avoid stacking two distributions together. Whether that is the right move for you is a tax question worth running past your tax advisor.

Qualified vs. non-qualified Annuities — the distinction that decides everything

Whether RMD rules touch your Annuity depends entirely on how the Annuity is owned.

Qualified Annuities

A qualified Annuity is one funded with pre-tax dollars inside a tax-advantaged retirement vehicle — for example, an Annuity held inside a traditional IRA, or one purchased with 401(k) or pension money that was rolled over. This is the kind of Annuity a 401(k), IRA, or pension rollover typically produces. Because the money inside it is pre-tax retirement money, a qualified Annuity is subject to the same RMD rules as the IRA or plan that holds it. Once you reach your applicable RMD age, the value in that Annuity counts toward the amount you must withdraw.

Non-qualified Annuities

A non-qualified Annuity is bought with after-tax dollars outside of a retirement plan. You already paid income tax on the money that funded it, so it is not part of the IRA/401(k) RMD system. The IRS RMD rules that apply to traditional IRAs and pre-tax plans do not apply to a non-qualified Annuity in the same way. That does not mean a non-qualified Annuity is tax-free — when you take money out, the earnings portion is still taxed as ordinary income, and withdrawing earnings before age 59½ can trigger a 10% federal early-withdrawal penalty on top of the tax. But the annual "you must take out at least this much" RMD requirement is a feature of qualified retirement money, not of after-tax non-qualified Annuities.

If you are unsure which category your contract falls into, that is one of the first things to confirm. It changes whether RMDs apply at all. Our guide on how Annuities are taxed goes deeper on the qualified-versus-non-qualified tax treatment.

The rule that trips people up: you cannot roll an RMD into an Annuity

This is the single most important rule to understand if you are planning to move retirement money into an Annuity around RMD age.

A required minimum distribution is not an eligible rollover distribution. In plain terms: the RMD portion of your money cannot be rolled over into an Annuity or any other retirement account. You have to take the RMD first, and then you can roll the remaining balance into a qualified Annuity by a direct (trustee-to-trustee) rollover.

The sequence matters. If you are in an RMD year and you want to reposition a 401(k) or IRA into an Annuity, the correct order is:

  • First, satisfy that year's RMD by taking it out (it will be taxed as ordinary income).
  • Then, roll the rest of the balance into the qualified Annuity, ideally by a direct rollover so the money moves institution-to-institution and you avoid the mandatory 20% withholding that applies when a plan distribution is paid to you.

People run into trouble when they try to move the entire balance in one motion and forget that the RMD had to come out first. If your RMD for the year has not been satisfied, that portion is treated as a taxable distribution regardless of where the rest goes. For the mechanics of moving retirement money into an Annuity the right way, see our guides on rolling a 401(k) into an Annuity and rolling an IRA into an Annuity.

How Fixed and Fixed Indexed Annuities interact with RMDs

The Jordan Insurance Agency works in the Fixed and Fixed Indexed Annuity lane only. Here is how RMDs play out with those specific products when they are held as qualified (IRA) money.

Taking the RMD does not automatically mean surrender charges

Many Fixed and Fixed Indexed Annuity contracts include a free-withdrawal provision — commonly up to about 10% of the account value each year — that you can take out without triggering a surrender charge. Your RMD amount often falls within that free-withdrawal allowance, which means you can usually satisfy your RMD without incurring a surrender charge. The exact free-withdrawal percentage is set in your specific contract, so read the policy or have it checked. If your required amount happened to exceed the free-withdrawal limit in a given year, the excess could be subject to a surrender charge during the surrender period.

Two trade-offs to keep in mind, because we always disclose them:

  • Surrender period and surrender charges. Fixed and Fixed Indexed Annuities carry a surrender period — in North Carolina, surrender charges typically apply during roughly the first 5 to 15 years from the policy issue date — during which withdrawing more than the free amount incurs a charge that declines over the life of the contract and reaches zero at maturity. Some contracts also waive charges in specific situations, such as nursing-home care; that is contract-specific.
  • Caps, participation rates, and spreads (Fixed Indexed). A Fixed Indexed Annuity credits interest based on only part of an index's movement, limited by a cap rate, a participation rate, and/or a spread, with a 0% floor so the value does not go down due to a negative index. Those limits are the trade-off for the principal protection. Withdrawing money — including for an RMD — before an index term ends may mean the contract does not credit all of the index-linked interest for that term.

Some carriers coordinate RMDs for you

Because RMD-age clients are common Annuity owners, many carriers can calculate the RMD for that specific Annuity and set up an automatic annual distribution so you do not miss the deadline. Whether that is available, and exactly how it is handled, depends on the carrier and contract. This is one of the practical things to ask about before you buy.

Income riders and annuitized income can help satisfy RMDs

If a qualified Annuity is producing income — either because you annuitized it or because you turned on a guaranteed lifetime withdrawal benefit (GLWB) income rider — those payments may count toward satisfying the RMD for that particular Annuity. Keep in mind that income riders are optional and typically cost extra, which is a trade-off to weigh. Whether the income stream fully satisfies the RMD for a given year is a calculation to confirm, and RMDs from one account generally cannot be satisfied by distributions from an unrelated account, so the rules should be checked contract by contract. Our guide on guaranteed lifetime income explains how those income features work.

A clearly-labeled hypothetical to tie it together

The following is a made-up illustration to show how the sequence works — not a quote, not a real contract, and not a recommendation. Every figure a real client would face depends on their own accounts and the IRS tables, confirmed with a tax advisor.

Imagine a Charlotte retiree, born in 1953, who turns 73 this year and has a traditional IRA she wants to reposition into a Fixed Annuity for more predictable, protected value. Because she was born before 1960, her applicable RMD age is 73, so this is her first RMD year.

The right order for her would be: first, take her required minimum distribution from the IRA for the year — that amount is taxed as ordinary income and cannot be rolled anywhere. She also decides to take it during the year she turns 73 rather than waiting until April 1 of next year, so she does not end up with two RMDs stacked into one tax year. Then, she moves the remaining IRA balance into the qualified Fixed Annuity by a direct trustee-to-trustee rollover, which keeps the transfer non-taxable and avoids the 20% mandatory withholding that would apply if the money were paid to her first. In future years, her RMD from that Annuity would likely fall within the contract's roughly 10% annual free-withdrawal allowance, so she could satisfy it without a surrender charge — and her carrier may even automate the annual distribution for her.

Change one fact — say she was born in 1961 instead of 1953 — and her RMDs would not begin until age 75, giving that money more time to stay tax-deferred before the withdrawals are required. That is why the birth-year detail matters so much, and why this is a conversation to have with a tax advisor for your actual numbers.

Common RMD-and-Annuity mistakes to avoid

  • Trying to roll the whole balance without taking the RMD first. The RMD must come out before you roll the rest into an Annuity. Skipping this step turns part of the move into a problem.
  • Forgetting the first-year April 1 wrinkle. Delaying the first RMD to April 1 can create two taxable distributions in one calendar year.
  • Assuming a non-qualified Annuity has an IRA-style RMD. After-tax non-qualified Annuities are not part of the IRA/401(k) RMD system, though their earnings are still taxable on withdrawal.
  • Overlooking the surrender-charge window. Most RMDs fit inside the free-withdrawal allowance, but a required amount above that limit during the surrender period could incur a charge — worth confirming against your contract.
  • Treating an Annuity's guarantees like a bank product. Annuities are not FDIC-insured. Their guarantees rest on the issuing insurance company's claims-paying ability, backed in North Carolina up to state limits by the North Carolina Life & Health Insurance Guaranty Association (up to $300,000 of present value of annuity benefits per individual, per member insurer). Our guide on whether Annuities are FDIC-insured explains what actually stands behind the guarantee.

A note on what we do — and do not — do

The Jordan Insurance Agency operates in the Fixed and Fixed Indexed Annuity lane only. We do not sell or advise on variable annuities or Registered Index-Linked Annuities (RILAs); those are securities that require a securities license and are outside our scope. We mention them only so you know the difference: a variable annuity's account value can go up or down with its investment subaccounts, while a Fixed or Fixed Indexed Annuity has a 0% floor that protects your principal from market losses. If your situation calls for a securities product, we will tell you plainly and point you toward the right kind of licensed professional.

We also are not a financial planner, an investment advisor, or a tax preparer. RMD amounts, exceptions, and the tax consequences of any distribution are decisions to make with a qualified tax advisor who knows your full picture.

How The Jordan Insurance Agency helps

The Jordan Insurance Agency is an independent, licensed insurance agency based in Charlotte, North Carolina, serving clients across the state. Because we are independent, we represent multiple carriers instead of just one — so when a Fixed or Fixed Indexed Annuity is the right fit for retirement money that will face RMDs, we can compare contracts side by side and explain the surrender periods, the free-withdrawal allowances, the caps and participation rates, any rider costs, and each carrier's financial-strength rating in plain English.

For clients near or in their RMD years, we can walk through the sequence the right way: making sure the required minimum distribution is handled before any rollover, that the rollover is done as a direct transfer to keep it non-taxable and avoid the 20% withholding, and that the Annuity's free-withdrawal provision lines up with future RMDs so you are not surprised by a surrender charge. We coordinate with your tax advisor rather than replacing them, because the actual RMD math and tax planning belong with a tax professional. When you are ready, reach out to The Jordan Insurance Agency and we will explain how an Annuity would fit your RMD situation — clearly, honestly, and with no pressure.