It is a tax annuity i have been paying 100.00 a month for 15 years and i want to cancel the account and withdrawal the money ,. i am not 59 1/2 and i am willing to pay the penaltiies. how do i begin this process?

  1. 37396 POINTS
    David G. Pipes, CLU®, RICP®PRO
    Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
    A variable annuity like a fixed annuity allows the owner to accumulate money on a tax deferred basis. Both types of annuities allow the owner to select a lifetime income to settle the contract. There are variations of that privilege but that is the basic benefit. The accumulation of money for the fixed annuity is guaranteed by the insurance company issuing the policy. The accumulation of money for the variable annuity allows the owner to select from a group of accounts, some of which are tied to publicly traded securities. The insurance company does not guarantee those securities that are tied to publicly traded securities.
    Answered on April 28, 2015
  2. 1554 POINTS
    Marcy TookerPRO
    Life & Health Insurance Agent, The Tooker Agency, Riverhead NY
    Qualified funds are funds that get special tax treatment through some particular provisions of the IRS code. IRA's, 401(k)'s and 403(b)'s are all examples of qualified plans. It sounds like you have been making these contributions directly (ie: not through payroll deduction), so your Variable Annuity is most likely an IRA. If that is the case it could be either a traditional IRA or a Roth IRA. The tax ramifications of your withdrawal will be different depending which type of IRA it is. As always, you should consult with your tax adviser before making any decisions.

    If you have a traditional IRA you most likely took a deduction on your tax return each year for your $1,200 contribution. If that is the case, the full amount of any withdrawal will be taxable. In addition you will pay a 10% early withdrawal penalty since you are not 59 1/2.

    If you have a Roth IRA you did not get a deduction on your tax return for your contributions. With a Roth IRA you can withdraw the total of your contributions without taxes or penalty. Any earnings that you withdraw will be subject to taxes and a 10% early withdrawal penalty. If it is a Roth IRA you may want to consider withdrawing your contributions only. You can then leave the earnings in the account until you are 59 1/2 at which time they can be withdrawn tax free.

    I would reinforce that some seemingly minor details can have a significant impact on the effect of the withdrawal on your taxes. Please talk with your tax adviser before finalizing your decision as to what to do.
    Answered on April 28, 2015
  3. 13 POINTS
    Joel Perez
    Financial Services, Mass Mutual,
    A qualified annuity differs from a non-qualified annuity, which is an annuity funded with after-tax dollars. While distributions (contributions to a qualified annuity are pre-tax) from a qualified annuity are taxed as income, distributions from a non-qualified annuity are not subject to income tax in their entirety. Qualified annuities are often set up by employers on behalf of their employees as part of a retirement plan.
    Answered on April 30, 2015
  4. 11472 POINTS
    Larry GilmorePRO
    Agent Owner, Gilmore Insurance Services, Marysville, Washington State
    You have a qualified variable annuity? The "qualified" part means all monies contributed into this product are done so on a pre tax basis. An "Annuity" is a product that can be sold inside a qualified plan or outside. The difference between the two are the tax deferral on the original money you put inside it. Inside a qualified plan, you get a tax break on the money you put in. Non qualified means you pay taxes on the money you put in first. Later, during distribution a portion of the payout will be taxable income and a portion won't as you already paid taxes on it.

    Variable means the annuity, usually based in security products, will gain OR lose based on the investment decision the purchaser makes by their allocations and their market performance. Variable means more risk for the possibility of greater return basically.
    Answered on May 5, 2015
  5. 21750 POINTS
    Jim WinklerPRO
    CEO/Owner, Winkler Financial Group, Houston, Texas
    That is a great question! I'd strongly advise that you check with your annuity's agent or your tax adviser before doing anything. You mentioned that you were willing to pay penalties and taxes, so I'm assuming that there is a pressing need for cash, or a great dislike for the policy/agent/company that has caused you to decide to gut your annuity? If so, I'd again advise caution. If you surrender your annuity, and it was meant to fuel your retirement, what is your plan to replace it? Will you end up suffering for many years for a temporary hardship if you surrender the annuity?
    Maybe it might be wiser to see what cash withdrawal you can make from the annuity without fees (you are allowed a certain amount without penalties or fees, and more if you are willing to pay any surrender fees that may still be applicable) and leave the annuity intact; you may also want to look at borrowing from a cash value of any whole life policy that you may have, as that also is a quick and relatively painless way to get cash.
    If your heart is set upon surrendering it, please bear in mind that there will be a 10% penalty, possible surrender fees, and a major tax bite from the amount that you might expect to get. Please assume that if you are lucky, you will recieve roughly half of what you are expecting to receive, depending upon your tax bracket. This type of investment is designed specifically for saving, and stopping the process is very costly. To start the process, contact your agent who sold you the annuity, or the plan administrator, and tell them of your intentions. If you would like to discuss this further, please do not hesitate to contact me, okay? I'd be happy to help. Good luck, and thank you for asking!
    Answered on May 6, 2015
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