Are Equity Annuities Taxed?
Equity annuities are a fairly new addition to the world of investors and savings plans. Created in 1998, they have become extremely popular in less than two decades and the sales for them have increased significantly. Only in between 2003 and 2004 was there a double in sales and ever since then they continued to rise.
Since they are so new and since they were created out of combining two other types of annuities, you may feel confused about them and how they work. While you may know some very basic things about them (that they combine variable and fixed annuities and that their performance depend on things such as the S&P 500, for instance), you may still have questions related to them.
One of these questions may be related to whether or not equity annuities are taxed and, if so, how they are taxed. In short, yes, equity annuities are taxed, but only when you start taking distributions. Up to that moment, they are tax deferred and you will pay nothing for them. The moment you start taking distributions though, they will be declared the same way as any other income. Furthermore, do bear in mind that anything you take out before being 59 ½ of age will be penalized by the IRS with 10%. Also, keep in mind another thing as well: all premium payments made into this account will be considered to be tax-free return of the principal.
The world of finances and investments can be very confusing at times and it is of the highest importance that you do ask any questions you may have. Learning as much as possible about the investments you make is absolutely essentially if you want them to be successful and if you want to avoid unpleasant surprises in the future.
Find more on indexed annuity.
Since they are so new and since they were created out of combining two other types of annuities, you may feel confused about them and how they work. While you may know some very basic things about them (that they combine variable and fixed annuities and that their performance depend on things such as the S&P 500, for instance), you may still have questions related to them.
One of these questions may be related to whether or not equity annuities are taxed and, if so, how they are taxed. In short, yes, equity annuities are taxed, but only when you start taking distributions. Up to that moment, they are tax deferred and you will pay nothing for them. The moment you start taking distributions though, they will be declared the same way as any other income. Furthermore, do bear in mind that anything you take out before being 59 ½ of age will be penalized by the IRS with 10%. Also, keep in mind another thing as well: all premium payments made into this account will be considered to be tax-free return of the principal.
The world of finances and investments can be very confusing at times and it is of the highest importance that you do ask any questions you may have. Learning as much as possible about the investments you make is absolutely essentially if you want them to be successful and if you want to avoid unpleasant surprises in the future.
Find more on indexed annuity.