Q:

Does an early withdrawal from annuity mean that the money taken out is still taxable income?

A:

Quick Answer

When making an early withdrawal from an annuity, income tax must be paid on the earnings and a 10 percent penalty is payable to the government. As of 2015, if funds are withdrawn from an annuity before the age of 59.5 years, it is considered an early withdrawal.

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Full Answer

When withdrawing from an annuity within the first five to seven years, a surrender fee may be payable to the insurance company. Companies typically charge 7 percent of the total withdrawal, but other companies can charge up to 20 percent of the withdrawal. Reviewing the company's policy on fees is recommended when considering a withdrawal.

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