Annuity RMD Rules: Variable, Fixed, Indexed & QLAC (2026 Guide)

Millions of retirement accounts hold some form of annuity — a deferred fixed annuity for principal protection, a variable annuity with a guaranteed lifetime income rider, or a fixed indexed annuity (FIA) tied to market performance. If your annuity sits inside a traditional IRA, 401(k), or other qualified plan, it does not escape required minimum distributions. But how your RMD is calculated — and whether annuity payments satisfy it automatically — depends on two questions: what type of annuity do you have, and is it still in the accumulation phase or has it begun making payments?

Accumulation-phase annuities: RMD is based on fair market value

If you haven't annuitized the contract — meaning the annuity is still growing and hasn't started making scheduled payments — your RMD is calculated from the annuity's fair market value (FMV) at December 31 of the prior year, exactly like any other IRA asset. The same IRS Uniform Lifetime Table divisors apply. You don't need a special calculation.

Where it gets complicated is how FMV is determined for different annuity types:

Fixed deferred annuity

The account value (also called the contract value or accumulation value) equals the FMV. There's no ambiguity — the carrier credits interest at a declared rate and the balance is what it is. Your year-end statement shows the number you use in the RMD calculation.

Example: A 74-year-old holds a fixed deferred annuity inside a traditional IRA with a December 31 contract value of $320,000. The Uniform Lifetime Table divisor at 74 is 25.5. RMD = $320,000 ÷ 25.5 = $12,549. The annuity can distribute that amount directly.

Fixed indexed annuity (FIA)

FIAs credit interest based on a market index (commonly the S&P 500) subject to a cap or participation rate, with a floor protecting principal. For RMD purposes, the FMV is the account value — not the income benefit base on any attached rider. This distinction matters because FIA income riders often build up a separate benefit base that can be two to three times the actual account value. The inflated benefit base is an income calculation device, not an asset value.¹

If annual income rider withdrawals exceed your RMD amount, those payments satisfy your RMD. See the SECURE 2.0 GLWB cross-account section below.

Variable annuity (VA)

Variable annuities invest in sub-accounts similar to mutual funds, so the account value fluctuates. The base FMV for RMD purposes is the current account value. But variable annuities commonly include enhanced benefits — guaranteed minimum death benefits (GMDBs), guaranteed lifetime withdrawal benefits (GLWBs), guaranteed minimum accumulation benefits (GMABs) — and these riders can push the FMV above account value.

The 120% rule for enhanced benefit valuation

Under IRS guidance, if the actuarial present value (APV) of all enhanced benefits plus the account value exceeds 120% of the account value, the RMD base must include the APV of those benefits. If the combined value is at or below 120%, the APV is disregarded and you use just the account value.²

In practice: a variable annuity where the market has performed well and the current account value is close to or above the guaranteed floor rarely triggers the 120% add-on. The issue arises when markets have fallen significantly and a high-water-mark death benefit or guaranteed accumulation benefit substantially exceeds the current account value.

Your carrier calculates this for you. Each December, insurance companies send a year-end FMV statement that includes the RMD-applicable value, already accounting for any enhanced benefit adjustment. Use that number, not just the account statement value.

Annuitized contracts: payments automatically satisfy the RMD

Once you annuitize a contract — converting it to a stream of guaranteed income payments — the RMD rules change entirely. You no longer look up a divisor and distribute from a balance. Instead, the annuity payment schedule itself satisfies the RMD, provided the payments meet three requirements under Reg. §1.401(a)(9)-6:³

1. At least annual frequency. Payments must be made at least once per year. Monthly, quarterly, and semi-annual payments all qualify; payments distributed less frequently than annually do not.
2. Nonincreasing. Payments cannot increase over time, with narrow exceptions: cost-of-living adjustments tied to the CPI, defined escalation clauses of up to 20% per year, and a few other actuarially defined exceptions. A contract that steps up payments by a guaranteed 3% per year over CPI likely fails this test.
3. Payment period does not exceed life expectancy. Payments must be made over your lifetime, the joint lives of you and a designated beneficiary, or a period certain that does not exceed your applicable life expectancy under the Single Life Table.

If all three conditions are met, the annuity payments are your RMD for that account. You don't calculate a Uniform Lifetime Table amount separately; the payment schedule is the distribution.

SECURE 2.0: GLWB payments can satisfy RMDs in other accounts

Before the IRS issued its final RMD regulations in 2024, there was a common planning problem: a retiree's FIA or variable annuity GLWB rider generated income payments larger than the RMD for that specific account, but those excess payments couldn't legally offset RMDs from a separate IRA. The IRS closed this gap.

Under the 2024 final RMD regulations, if you hold an annuity with a GLWB or guaranteed lifetime income rider inside an IRA and the annual income payments exceed that account's own RMD, the excess income can satisfy RMD obligations from other IRAs you own — because IRAs aggregate for RMD purposes.⁴

Example: A 75-year-old holds a $600,000 FIA inside IRA #1 with a $48,000/year GLWB payment. The RMD on IRA #1 is $26,300. She also has IRA #2 with an RMD of $18,400. Total RMD = $44,700. The $48,000 GLWB payment ($3,300 excess) more than covers IRA #1's RMD. Under IRA aggregation rules, she can designate the entire $48,000 payment as satisfying both IRAs' combined RMD requirement, rather than taking a separate distribution from IRA #2.

Note: 401(k) and 403(b) annuity payments cannot offset IRA RMDs — they remain separate pools.

QLAC: the one annuity type that reduces your RMD base

A Qualified Longevity Annuity Contract (QLAC) is the only annuity that legally removes a portion of your IRA balance from the RMD calculation. Up to $210,000 (2026 limit, per IRS Notice 2025-67) can be allocated to a QLAC inside your IRA, and that premium is excluded from your December 31 balance when calculating your annual RMD — for as long as the contract remains in deferral.⁵

SECURE 2.0 §202 (2022) eliminated the old 25%-of-account rule, so the $210,000 flat cap applies regardless of IRA size. Income must begin by age 85. See the QLAC Calculator to model RMD reduction and tax savings during the deferral period.

Standard deferred annuities, FIAs, and variable annuities inside an IRA do not reduce your RMD base — their full FMV is included in the RMD calculation. Only contracts that qualify as a QLAC under IRS requirements (purchased as a designated QLAC with Form 1098-Q reporting by the carrier) receive the exclusion treatment.

Non-qualified annuities: no RMD rules apply

If you purchased a deferred annuity with after-tax dollars outside any IRA or employer plan — writing a check directly to an insurance carrier — you hold a non-qualified annuity. Non-qualified annuities are not subject to RMD rules at any age.¹

They are, however, subject to ordinary income tax on the earnings portion of any withdrawal (LIFO — last-in-first-out — treatment under IRC §72), and annuity payments are partially taxable under the exclusion ratio. But the IRS does not require you to withdraw from a non-qualified annuity. Many retirees use non-qualified annuities specifically to defer income past RMD age.

The important distinction: if you rolled over qualified plan assets into an IRA annuity, that is now a qualified annuity subject to RMD rules. The pre-tax nature of the original contribution determines the qualified/non-qualified status — not the insurance wrapper.

Aggregation rules with annuities

The same aggregation rules that govern regular IRAs apply when an annuity is inside an IRA:

• Annuity inside a traditional IRA: Its FMV pools with all your other traditional IRAs for RMD calculation. You can satisfy the combined RMD from any one IRA, or any combination — including taking the entire RMD from a non-annuity IRA to avoid triggering surrender charges on the annuity during the surrender period.
• Annuity inside a 401(k) or 403(b): Separate pool. Its RMD cannot offset an IRA RMD, and vice versa. Each employer plan must satisfy its own RMD separately.
• Multiple annuities inside multiple IRAs: All IRA FMVs (including annuity FMVs) add together; the combined RMD can be taken from whichever accounts you choose.

QCDs and annuities: an important restriction

Qualified Charitable Distributions (QCDs) must come from an IRA directly to a qualified charity. You cannot direct an annuity payment to a charity and have it qualify as a QCD. If you want to use a QCD strategy alongside an annuity IRA, you need a separate traditional IRA (non-annuity) to make the QCD transfer. The 2026 QCD limit is $111,000 per person; see the QCD Calculator for the tax savings and IRMAA impact.

When to get advice

Variable annuity valuations with enhanced death benefits, partial annuitization decisions, and GLWB cross-account satisfaction strategy involve genuine complexity — getting the FMV calculation wrong produces an incorrect RMD and potentially a 25% IRS penalty on any shortfall. If your annuity represents a significant share of your retirement assets:

• Ask your carrier for an explicit year-end RMD-applicable FMV statement (not just the account statement)
• Verify whether any enhanced benefit rider triggers the 120% add-on valuation
• Model whether GLWB payments satisfy all your IRA RMDs before deciding whether to take additional distributions
• Evaluate whether converting part of a large deferred annuity to a QLAC makes sense given your balance and income timeline

These decisions interact with your tax bracket, IRMAA tiers, and Roth conversion window. A fee-only advisor who specializes in retirement distribution — not an annuity salesperson — can model the full picture.