Cashing out an annuity to avoid taxes?

you aren't avoiding any tax - it will still be taxed when you pull the money out of the IRA and you can only put $5000 into an IRA per year - you can't "roll over" the money from an annuity like a 401k plan

The 20% (automatic, required by law, due upon cash out) is only a down payment on next April's taxes. There is no way to avoid it, except by transferring the funds directly (you can't even touch the money) to another IRS approved plan. Your actual tax on the cash out might be more or less. Check with your tax adviser as there are a lot of complex issues in calculating the actual tax.

There's too many variables to that question. If you're under 59 1/2 you'll pay a 10% penalty. So if you flat out cash it in all of the gain will be taxed...and possibly penalized.

One possibility, depending on your age, is to annuitize it over a fixed period to spread out the return of principal and interest..

Talk to an advisor who can help you make the decision.

Good luck,

Jeff

Since there are strict limits on what you can contribute each year to an IRA this probably doesn't work.

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