Author Topic: Question about annuity early withdrawal  (Read 2480 times)


  • Guest
Question about annuity early withdrawal
« on: March 25, 2012, 02:20:02 AM »
   About  15 years ago I inherited a little bit of money, and not knowing what to do with it I listened to my helpful Fidelity advisor and deposited it into a variable annuity.  Then 10 years ago I moved it to Vanguard.  I am now considering cashing it out to buy rental property with.  I think I will be calling the IRS on Monday, but I wondered if anyone on here knew much about this. 
   It was bought with already taxed money.  I know there is a 10% tax penalty, but I have read 2 different articles, one saying the 10% applies to profit but not the original cash basis, and one saying it applies to the whole withdrawal.  Also, I have read there is income tax on the whole withdrawal, and another article that says the income tax is just on the profit.  Also, there could be a penalty from Vanguard on withdrawing early - I'll have to call them on Monday, also.
  I have also read the IRS website, but do not really inderstand it!
  If the 10% penalty plus income tax is just on the profit, it may still be worth it. This is not a very big account, but it could cover a downpayment on 1 or 2 inexpensive rental houses.  I don't know any accountants to call, so I am not positive what to do.