IRA owners can buy a single-life immediate annuity inside their IRA, to provide a guaranteed income stream, no matter how long they live. Then they can take distributions from the IRA and buy insurance on their life. If you follow this strategy with all of your IRA money, you can enjoy these benefits:
* You’ll increase your after-tax spending if you shop around for a high-yielding annuity.
* You can lock in lifelong income so you will never run out of money.
* You’ll arrange for your beneficiary to receive the insurance proceeds, possibly tax-free, no matter when you die.
* You’ll be sure that your IRA won’t be subject to estate tax because there will be nothing in the account at your death (when the immediate annuity expires).
* You no longer will have to worry about investing the money inside your IRA.
* Your IRA beneficiaries won’t receive anything so they won’t have to be concerned about making the right election after your death or worry about the IRA custodian mishandling the account.
Realistically, few people will place 100 percent of an IRA into an immediate annuity. You might, though, put one-third of your IRA into an immediate annuity, leaving the other two-thirds in conventional investments. Then you can buy life insurance to replace the amount spent on a single-life annuity.
