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| *Loan,banking and credit>>>deferred tax |
If I buy a non-qualified deferred annuiity and withdraw money before 59 1/2, do I have to pay tax penalties? |
If I buy a non-qualified deferred annuiity and withdraw money before 59 1/2, do I have to pay tax penalties? You will pay taxes. You will pay a 10% penalty from the government for early withdrawal and depending on how much you withdrawal you may be subject to surrender charges. Because it is a non-qualified DA, money in is not tax deductible and the Tax Reform act of 1986 made any withdrawals from them prior to age 59 1/2 subject to a 10% penalty. Yep, you would. NASD Series 7 exam prep., http://www.annuity-insurers.org/pdfs/rec... Before 59 1/2, you would be subject to the 10% penalty. Because the annuity is NQ, it was funded with after tax money. When you take a withdrawal, some of the withdrawal may be return of principal and therefore not taxable. Before you make a withdrawal, you can have the insurance company calculate how much is taxable and how much is return of principal. Also keep in mind that annuities generally have surrender periods. Sometimes the surrender period can be up to 10 years. If you make a withdrawal during the surrender period, you will also be subject to a fee that sometimes can be substantial. |
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