Early Withdrawal of Annuity

L1: Early Withdrawal of AnnuityI am having a great deal of difficulty understanding IRA terminology/definitions and cannot determine if I can ‘early withdraw’ my annuity.
In addition to IRA, I have a variable annuity that I added to through the years when I maxed on IRA contributions for the year. The annuity is tax deferred, but I received no ‘page 1 deduction’. This is allmy own money I contributed — I’m not self employed.
Is the definition of such an annuity an ‘unqualified’ or ‘qualified’annuity?
Am I able to withdraw earlysubject to the same rules as an IRA?
Thanks…2004-11-15 08:28, By: YOHO, IP: [69.64.132.12]

L2: Early Withdrawal of AnnuityHi YOHO. Must say I think you win the “most original name” contest on this site.
The terms “Qualified” and “Non-qualified” and “Pre-tax” and “After Tax” don’t really mean the same but have the same affect so have become interchangeable. A “Traditional, DeductibleIRA” is not a “qualified plan” but a “401(k)” is a “qualified plan.” However, the similarity is that both are funded with “Pre-tax dollars” meaning you got a tax break when you put the money into the plan and you will pay taxes on everything when you take the money out. Are you getting a clearer picture of the confusion?
Based on your description, I would say your have a “Non-qualified” or “After-tax” Variable Annuity. The rules are that you have to wait till 59 1/2 to take the money out without an IRS penalty of 10%, and you will have a “taxable event” upon withdrawal.There are two way to take the money out: a) Annuitization and b) systematic withdrawal. With Annuitization you get some tax break because part of the withdrawal is considered “After-tax money,” but with systematic withdrawals, all of the money coming out is considered taxable as “Ordinary Income” until you get down to your basis and then it’s not taxed.
I’m going to stop here and let TheBadger discuss the SEPP aspects. Please respond with your age as that will influence his answer.
Good luck.
Jim2004-11-15 09:03, By: Jim, IP: [68.1.157.228]

L2: Early Withdrawal of AnnuityYou are describing a non-tax qualified annuity. If you are under the age of 59.5, Substantially Equal Periodic Payment [SEPP] plan is available as described in IRC Section 72(q) they are almost identical to the rules for tax-qualified plans which are governed by IRC Section 72(t).2004-11-15 09:24, By: Gfw, IP: [172.16.7.101]

L2: Early Withdrawal of AnnuityThanks for the completereply!!! I am 54 and the wife is 52. We will try understanding the IRC Section 72(q). We both have annuities (along with IRA’s) and want to combine those monies allowing us enough income to retire early (in about 2 years). It sounds like we can do so. thanks again…….2004-11-16 06:48, By: yoho, IP: [69.64.131.24]

L2: Early Withdrawal of AnnuityDo NOT combine the funds. Set up seperate SEPP plans for each typeof account. 2004-11-16 07:14, By: Gfw, IP: [172.16.1.72]