RSS
Home
Guerilla Budgeting 101-Part 4
Print
Email
RSS
Subscribe
Parts 1 and 2 of this series focused on creating a Guerrilla Budget in the event you're laid off or otherwise lose your job in this tough economy. Part 2 considered tapping savings accounts, CDs, money market accounts, and mutual funds to make ends meets. Part 3, looked at your life insurance cash values as a potential resouce.
In this article we'll look at your non-qualified annuities as a source of cash flow in a tight time.
Many people have invested in fixed, variable, and indexed annuities over the last few years. There are two major considerations when withdrawing from annuities:
First, many annuities have "surrender charges" associated with them. The charges come into play if you seek to cash in or withdraw from your annuitiy during the early years. The charge is applied to the amount of the cash surrender value or the amount withdrawn. Check with the person who sold you the annuity, or the company with which it was placed, to determine if a surrender charge applies. If it does, you may have less receive less than expected.
Secondly, a surrender or withdrawal may have tax consequences. In general, if their is "gain" in the contract, i.e., the cash value exceeds the amount you've paid in, the surrender or the withdrawal will be taxable to the extent of the gain. Furthermore, except in relatively rare situations, a 10 percent penalty applies to withdrawals prior to your age 59 1/2.
Check with your banker, insurance, or tax advisor before tapping into an annuity to avoid unexpected consequences.
