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In a fixed annuity, the insurance company agrees to pay you no less than a specified rate of interest during the time that your account is growing.The insurance company also agrees that the periodic payments will be a specified amount per dollar in your account.Taking money early The other major tax consequence has to do with the retirement-related nature of annuities.The IRS imposes the same penalties for early withdrawals from annuities that it does for IRAs and retirement accounts.
Still, the strategy is worth considering if your objective is to get a better annuity rather than getting out of annuities entirely.
When you cash in an annuity, you have to be aware of the potential tax consequences.
Below, you'll get a quick look at how various situations can affect your taxes.
If you follow the rules correctly, you can make an annuity switch without the usual tax consequences.
The catch, though, is that the money has to go directly from one annuity provider to the other without ever passing through your hands.