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Greetings, 2gynkv, and welcome. You asked:

I have a tax-deferred annuity account worth about 2K. I never claimed the principal off my income back in 95 when I opened it.

Can I, and if so, How do I roll-over this account into my Roth IRA? Do I first have to roll it over into a traditional IRA?

Since I never took a deduction for the principal will I still owe tax on the transfer?

You have an annuity purchased with after-tax money. Although the earnings on that annuity are tax-deferred, the annuity itself is not an IRA or a tax-qualified retirement plan. Therefore, it is not eligible for transfer to an IRA under any circumstances. If you surrender it now for its cash value, you will almost certainly pay a surrender fee to the insurance company that sold it to you. Additionally, you must pay taxes on any earnings over an above your cost of that annuity. Your basis (i.e., purchase price) will not be taxed because you've already paid taxes on that amount. Further, if you are under the age of 59 ½, you will pay an additional 10% early withdrawal penalty on all earnings.

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