10% penalty for early withdrawal of annuity
If someone has an IRA and it is in a deferred annuity and is age 50, and they do a trustee to trustee transfer from the annuity to a non-annuity IRA, do they still get hit with the 10% penalty for taking money out of the annuity prior to age 591/2? I am keeping in mind that in this example, the funds are being moved from one IRA to another IRA hence no penalty for moving funds prior to age 59 1/2 in that case, but is there a separate 10% penalty for moving the funds out of the annuity to something else that is still an IRA?
Permalink Submitted by Al Fry on Tue, 2008-10-14 18:21
The 10% penalty for non-qualified annuity withdrawals comes from IRC Sec. 72(q); whereas the IRA 10% penalty is covered under 72(t) (the Code likes to keep us confused that way). One of the exceptions under 72(q) is if 72(t) applies (IRC Se. 72(q)(2)(H)). So the answer is no.
Permalink Submitted by Robert Belknap on Tue, 2016-02-02 18:20
Client has non-Qualified annuity with income rider. If he starts lifetime income payments is he subject to penalty
Permalink Submitted by Alan - IRA critic on Tue, 2016-02-02 18:29
NQ annuities do have an immediate annuity penalty exception per the following, however client should ask the insurance company if the conversion to lifetime payments meets the immediate annuity definition mentioned in Sec 72(u):