Penalties associated with withdrawing from an annuity?

Question

I have about $4k in an annuity I opened years ago with Amex. The returns have never been more than about 3% per year. I'd like to close the thing and get the money. I'm planning to make an investment that will return more money than that. I could take money out of my 401k, but would rather do that as a last restort. I figure the penalties associated with going the annuity route are much less.

I'm assuming I'd have to pay tax on the growth, as well as a 10% early withdrawl penalty, on the growth. The principle itself was always paid with after tax dollars.

Answer 1

I'm assuming I'd have to pay tax (at your ordinary income level) on the growth, as well as a 10% early withdrawal penalty, on the growth. The principle itself was always paid with after tax dollars

They might also be a CDSC (contingent deferred sales charge) that might be associated with the annuity as well.

I would call amex and see if you can get this information.

Secondarily as a return standpoint.  The S&P has returned 3.89% over the last 10 years.  Considering that you had to pay fees of approximately 2-3% inside that annuity, you did better than most people have done.

Not such a bad investment.