The most clear-cut way to withdraw money from an annuity without penalty is to wait until the surrender period expires. If you take your money out before you reach age 59 ½, you will owe an additional 10 percent early withdrawal penalty to the IRS.

Can you convert annuity IRA to Roth IRA?

Although you cannot directly convert a non-qualified annuity to a Roth IRA, you can transfer your annuity to a Roth IRA by withdrawing your funds, paying the taxes on the growth and depositing the remainder — up to your annual contribution limit — in your Roth account.

Does my annuity count as income?

If you purchase an annuity with pre-tax dollars, payments from the annuity are fully taxable as income. If you buy an annuity with after-tax funds, you are required to pay taxes only on the earnings.

What happens when you surrender an annuity to a Roth IRA?

Surrender Procedures. When you surrender an annuity, you get a cash payment from which the surrender charge has been subtracted. If the annuity provider pays the money directly into your Roth IRA, you have nothing to report. However, you might instead receive a check from the provider.

Is there a penalty for surrendering an annuity before age 59?

The tax penalty for surrendering the money before age 59 1/2 was 10 percent as of 2010. Call the TSA administrator at the number located on the plan statement. Ask if there are any surrender charges or penalties for liquidating the annuity.

What’s the surrender charge on a variable annuity?

The surrender charge is a percentage of the total amount withdrawn and will gradually decline as time goes on. For example, an 8% charge may apply the first year and decline by 1% every year until it no longer exists. Before you cancel or exchange any variable annuity, check on any fees that may be applied.

Do you get a check when you surrender an annuity?

When you surrender an annuity, you get a cash payment from which the surrender charge has been subtracted. If the annuity provider pays the money directly into your Roth IRA, you have nothing to report. However, you might instead receive a check from the provider.