If you're less concerned about income now and more about what you might leave to your family, there are simple annuity strategies that can optimize your estate, writes Stan Haithcock of StantheAnnuityMan.com.

A question that I get asked all the time is: “Should someone put an annuity within an IRA?”

The answer that I always give is that it depends on what they are trying to achieve with their IRA assets. If “legacy” is your primary goal, then a specific annuity strategy could work well within your IRA, by providing contractual guarantees along with a pure “transfer of risk.”

Let’s take a look at three specific IRA strategies using annuities that I currently implement with my clients, and how these strategies might work for you.

RMD Legacy Strategy
A lot of people who have IRAs would never touch that money if the IRS didn't require them to take Required Minimum Distributions (RMDs) at age 70 1/2. Does this sound like you? If so, I use a specific fixed indexed annuity that offers a contractual 4% annual compounding death benefit to offset the annual RMD withdrawal amount.

If you implement this annuity in your mid-60s (or earlier), you will be guaranteed to leave more money to your IRA beneficiaries regardless of how long you take RMDs, because of the compounding effect of the annual 4% contractual guarantee. If you are older than 70 1/2 and already taking RMDs, the 4% contractual guarantee will offset the majority of your RMD withdrawal amount.

Because fixed indexed annuities protect your principal and lock in gains annually (or biannually depending on the product), this is the best vehicle to implement this strategy. By the way, there are more than 500 fixed indexed annuities in the country, and I only like one for this specific RMD Legacy Strategy.

Leveraged Legacy Doubler Strategy
This strategy is a little “fancier,” but is a great way to leverage your IRA assets to leave more money to your IRA beneficiaries. Please note that you should have your CPA or tax lawyer sign off on this strategy from an estate planning and taxation standpoint. Here’s how the Leveraged Legacy Doubler Strategy works.

With your IRA assets, you purchase a Single Premium Immediate Annuity (click here to read a past MoneyShow article I wrote about SPIAs). A SPIA is a pure “transfer of risk” lifetime income stream that functions just like your pension payment or Social Security payment. The SPIA payment comes out of your IRA, and will cover the Required Minimum Distribution for the rest of your life while providing a lifetime income stream.

If you are one of those people who do not need the RMD income, I advise my clients to purchase a life insurance policy on themselves using the annual RMD dollar amount (after taxes). You will receive a lifetime income stream, cover your RMDs, and your beneficiaries will get a tax-free lump sum death benefit from your life insurance policy upon your passing.

Obviously, you will have to be able to “qualify” for life insurance. But if you are healthy and insurable, this is a phenomenal way to maximize your IRA for both you and your beneficiaries.

Another “twist” that you can do with this strategy would be to set up the SPIA for a joint life payment with your spouse. You still would use the after-tax money from your annual RMD to buy a life insurance policy, but upon your death, your spouse would still receive the lifetime income stream and the tax-free lump-sum death benefit. Now that’s what I call a legacy!

Stretch IRA Strategy
I’m always surprised how many financial advisors are not familiar with the Stretch IRA Strategy. It’s been around for a long time, and is fully approved by the IRS. Stretching your IRA means that your RMDs can be taken over multiple generations when your beneficiaries are listed properly within your IRA.

For example, when you pass away, you spouse can take your RMDs over their life expectancy. When your spouse passes away, your child can then take your RMDs over their life expectancy. When your child passes away, then your grandchild can take your RMDs over their life expectancy.

A “Super Stretch” means that the primary beneficiary would be your grandchild, and the IRA would be stretched over that child’s life expectancy. I just had a client that passed away, and the primary beneficiary was a 2-year-old grandchild who will now receive their grandfather’s RMD for their life expectancy. Talk about an annual gift from good old granddad!

Fixed annuities (not variable annuities) work well under the Stretch IRA guidelines because there is no market volatility, and the IRA asset has a better possibility to be stretched over multiple generations. Stretching your IRA lessens the tax liability on your IRA for your beneficiaries, because taxes are paid only on the annual RMDs, not the total.

Whether you use a fixed annuity within your IRA for a future Stretch IRA Strategy, your current IRA should be set up for your listed beneficiaries to at least have this option upon your passing. If your advisor/agent/broker is not familiar with this strategy, then you need to consider finding another advisor!

When annuities are placed within an IRA, they become products like any other investments that you have. Any tax-favorable status attached to the annuity doesn’t apply because it is inside an IRA structure. However, this doesn’t mean that annuities don’t work well within an IRA.

The question that you need to ask is “What would I like to achieve with my IRA assets?” If legacy is the answer, then a specific fixed annuity strategy might solve that problem. Trust me when I tell you that your beneficiaries will love you for taking these steps to maximize your IRA.

I am proud to say that a news reporter recently called me the National “Annuity Consumer Advocate” in the same vein as Ralph Nader and Clark Howard are for other products and services. That is my goal as Stan The Annuity Man, and I hope to continually educate the public on the complex and sometimes ugly world of annuities and become the go-to resource for “all things annuity.”

I recently published The Annuity Stanifesto, fully explaining in an easy-to-read format how these misunderstood and misrepresented products actually can work within your portfolio. You can get a free copy of The Annuity Stanifesto by going to my Web site and downloading your copy.