Annuities Tax Deferred What It Means To You
Annuities Tax Deferred
Deferred annuities accumulate interest earning on a tax-deferred basis. Annuities are not taxed while in the accumulation period it is taxed once funds are paid out. The IRS imposes a penalty as well as taxes on early withdrawals (and loans) from annuities. This is done to stop people from using annuities as short term investments vehicles.
If you take a partial withdrawal it will be treated as earning income (and often taxed as ordinary income); only after all earning have been taxed is withdrawal considered a return of principal. It is best to check with your tax accountant or CPA for updated tax law and IRS changes on annuity or any other type of retirement investment withdrawal.
IRS Annuity Early Withdrawal
There is a 10% penalties charged on early withdrawals from a deferred annuity before the age of 59 ½. If you have reached the old ripe age of 60 (or over 59) your withdrawals are not subject to the 10% penalty tax but are still taxed as ordinary income.
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