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Whats the tax on payout of an annuity bought as an investment?

April 26, 2017Annuity bought Investment payout tax

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Whats the tax on payout of an annuity bought as an investment?

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A. Such an annuity is purchased with after-tax dollars. You still get the benefit of tax deferral on the earnings. However, you pay tax on the part of the withdrawals that represent earnings on your original investment. If you make a withdrawal before the age of 59-1/2, you will pay the 10% penalty only on the portion of the withdrawal that represents earnings. You are not obliged to start withdrawals at age 70-1/2 or any other age.