AboutJohn D Smith, CFP Expertise I can answer detailed questions regarding mutual fund investing, retirement planning, education planning and related financial planning/investment issues. I have a B.S. degree in Financial Planning & Counseling. I am also a Certified Financial Planner (CFP) and have performed fee only investment management and financial planning services for the past 11 years.
Question I currently have an ING annuity which I've had since 2004. I've never taken any withdrawals from the account, but
find myself in financial trouble and would like to make a withdrawal. My account shows a "penalty-free withdrawal"
amount of nearly $10k. If I were to withdrawal that amount - does that mean there are truly no fees? What about tax
implications - this account net investment results is negative nearly $30k - would I still be paying tax on this
withdrawal even though the investment has lost money?
I also have several mutual fund investments that are at around a 30% loss if I sold them. Would it be a better option
to sell mutual funds that are down for the cash I need - and then use that loss for a tax benefit?
Thanks for your help - looking for options.
Answer Hi. If you are under age 59 1/2 then any withdrawal from an annuity is subject to a 10% tax penalty for early withdrawal. This is imposed by the IRS not the annuity company. The 10k penalty free withdrawal you are referring to I believe is the amount you can withdraw that will not be subject to a surrender charge that the annuity company imposes for a certain number of years (typcially 5-7 years at a declining scale). In regards to the taxation of withdrawals, if it is an IRA annuity then any amount withdrawn will be considered taxable income. If is not an IRA annuity then taxes are only owed on amounts greater than the premium payments made. In your instance it sounds like the value is less than the premiums paid. If you have mutual funds with losses then these losses can be used as a tax benefit so this could be a better way to go. The correct answer in regards to the best place to pull $$ from is based on tax and other issues such as which is a better investment vehicle for the longer term, etc, which is more detailed than can be discussed in a forum such as this. I hope this helps.
