10% IRA pre-59 1/2 penalty
If someone under 59 1/2 has an annuity and wishes to cash out prior to 59 1/2, and the annuity is in an IRA account, would there be a 10% IRS penalty for the annuity pre-mature withdrawal, as well as a 10% IRS penalty for the IRA pre 59 1/2 withdrawal, for a total of 20% penalty, or is there only a 10% penalty combined for both?
John Raines
Permalink Submitted by Alan Spross on Mon, 2008-12-08 21:22
Just one IRS penalty. The IRA rules trump the annuity rules in this situation because the annuity is held in an IRA.
However, there could also be surrender charges if the annuity was not held long enough. These are of course paid to the insurance company and are not taxes, however they still operate as a penalty for terminating the contract early.