| An annuity can be thought of as a bucket. You place | | | | for at least 10% account withdrawal every year so |
| money into the annuity bucket and your bucket of | | | | the annuity itself is very liquid. |
| money is treated differently than your other financial | | | | · There are no IRS penalties if the owner takes out |
| planning buckets. | | | | distributions after attaining the age of 59 1/2 or after |
| Annuities & Taxes | | | | the death of the owner of the annuity policy. |
| · You give the insurance company your money | | | | · No penalties if you are disabled |
| (premium) for your annuity. If you already paid taxes | | | | · Structured settlement court agreements |
| on this money, you are making a contribution and will | | | | · Required Minimum Distribution (RMD) - Once the |
| never be taxed again. | | | | annuity owner turns 70 1/2 the government requires |
| · Once you place your money into one of the many | | | | you to take a distribution from your annuity contract |
| types of annuities, your account value will continue to | | | | · IRA penalty- Failure to take your RMD at the end |
| grow. Unlike a savings account, CD, or mutual fund | | | | of the calendar year will result in an IRS penalty of up |
| your earnings will not be taxed at the end of the year. | | | | to 50% of the required distribution. |
| Annuity Distribution | | | | Annuity Exchanges |
| Eventually the IRS will at some point collect taxes on | | | | A 1035 exchange allows for the direct transfer of |
| the earnings. | | | | money from a non-qualified annuity or life insurance |
| · If and when you take a withdrawal from your | | | | policy from one company to another without incurring |
| annuity, you will have to pay taxes on the interest first. | | | | and an IRS penalty. As long as the money goes from |
| This is what we in the industry call Last In First Out | | | | company to company there will be no taxes due. If |
| (LIFO). 100% of your earnings are taxed at ordinary | | | | you take possession of a check and it is made out to |
| income tax rates instead of capital gains tax rates. | | | | you, you could have some major taxes issues. It is |
| · Taking money out of your annuity before 59 1/2 will | | | | always best to go from carrier to carrier. If you want |
| subject you to an IRS penalty of 10%. Annuities are | | | | to know more about annuities, then click on the link in |
| retirement vehicles and are treated the same as an | | | | the resource box below. |
| IRA or other qualified tax plans. Most annuities allow | | | | |