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.
Below, you'll get a quick look at how various situations can affect your taxes.
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The basic rules for annuity taxation The first question in evaluating the tax consequences of cashing in an annuity is what you mean by cashing the annuity in.
If you mean annuitizing the contract and starting to get regular payments, that's different from taking money out before you annuitize.Annuitized payments are divided into part principal and part earnings, with taxes on the earnings but none on the principal.