Pay penalty for early annuity withdrawal — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

Pay penalty for early annuity withdrawal

by on
in Small Business Tax

Q: I invested in a variable annuity when I was 39. Now that I'm 52, I want to begin withdrawals to help pay my daughter's college expenses. Will I have to pay an early withdrawal penalty? D.T., Raleigh, N.C.

A: Not if you make the proper planning move. As with retirement accounts, distributions from a tax-sheltered annuity are usually subject to a 10 percent penalty tax if they're made prior to age 59 1/2, unless a special exception applies. With an IRA, a special exception exists for distributions made to pay qualified education expenses. But this exception doesn't apply to early withdrawals from an annuity. But here's an exception you can use: Payments that are "substantially equal periodic payments" are free of the 10 percent penalty. That means you could arrange to take penalty-free annuity-like payments from your variable annuity. Check with your annuity company about this option.

Related Articles...

    No matches

Leave a Comment