Ira Withdrawal Early Rules
September 4th, 2006
Question: Withdraw of annuity contribution is taxable?
I know early withdrawal of Roth IRA distribution is taxable, but you can always take out contribution without tax consequences.
Does the same rule apples to annuity?
I want to know the my CONTRIBUTION is taxable?
I don’t care about distribution since it is not a lot thank to the economy.
Answer: Great question! Since both may be funded with after-tax dollars, contributions to a Roth IRA and to a non-qualified annuity (not in an IRA or other retirement plan), when withdrawn, are tax free because you’ve already paid the tax on it, with one BIG difference; you can’t get to the contributions in an annuity until you’ve removed the earnings, if any, first!
The ordering rule for Roth withdrawals is contributions first, so they may be removed, anytime, without tax or penalties. It’s just the opposite with annuities since EARNINGS come out first. So, to the extent there are earnings in both accounts, for example, you’d trigger tax consequences with an annuity withdrawal, and potentially none with the Roth if you withdraw the contributions and leave the earnings in the account.
Of course there may be product fees associated with a withdrawal in either account.
Hope that answers your question and earns your Best Answer vote!
DISCLAIMER FOR PROFESSIONALS: While the information in this response was obtained from sources believed to be reliable, its accuracy and completeness cannot be guaranteed. The opinion voiced in this answer is for general information only and it shall not be construed as tax, legal, or investment advice for any individual. Questioners are urged to consult with their professional advisers before making any decisions regarding their finances.
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