Early Withdrawal

Archive for February, 2007

Question: If I have a deferred annuity, can I roll it over to a new deferred annuity without a tax penalty?

I want to close out my account with a firm, so I would like to “roll over” my deferred annuity to another financial institution. But I don’t want to have to liquidate it and suffer an early-withdrawal penalty. Can I roll it into another deferred annuity?

Answer: The first question you need to answer is whether or not the Contingent Deferred Sales Charge has gone away or not. They usually last for 7-10 years depending on the company. If the account is “penalty free” then you could transfer the account to a different company.

If the annuity is non-qualified, you can do a 1035 exchange into a new annuity. If it is an IRA or qualified plan, you could rollover the annuity into a new annuity or other qualified account. As long as you don’t take possession of the money, there will be no tax consequences.

Is an Annuity Right for Me?!

Question: Early Ira Withdrawal has a federal 10% penalty that can be avoided by a 72t Plan. How about 2.5% CA penalty?

Answer: California and federal taxes on early distributions are the same except for the rates of tax assessed.

If your 1099R shows Code 2 in Box 7 (early distribution, exception applies), then no penalty is assessed and you do not need to use Form 3805.

Juve Stabia – Noicattaro 4- 0 ventiseiesima giornata di campionato Lega Pro 2009/2010

Question: Can I withdraw ( up tp $10,000 ) from my 401k for a house down payment?

I believe the IRS allows a withdrawy of up to $10,000 from a retirement account ( IRA, 401k, etc ) towards the down payment of a home with no penalty and the withdrawal would not be included as taxable income? Is this correct?

Answer: You are talking about a loan against your 401K. In that case you can take money out. However, you are required to pay it back. Depending on the plan you may only have a limited amount to pay it back, and the loan repayment comes directly out of your Payroll each pay period. This is the reason they don’t hit you with any penalties or taxes in this case.

However, if you leave your job for any reason(even if they lay you off). That money is due immediatly. If you do not pay it back then you are hit with all the penalties and it becomes earned income.

If you just wanted to take the money out of your 401K, it then becomes regular income and you owe taxes and penalties on it. There is no minimum amount you can get out of paying the penalties or interest.