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Author: peppermintpatty Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 19483  
Subject: Re: Annunity Laws Date: 10/12/2000 7:56 AM
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Pixy - You said:

<<Earnings taken before age 59 1/2 are penalized and taxed just as they are in a traditional IRA or annuity. In the latter two, part of any withdrawal is always considered composed of already taxed contributions>>

Actually, withdrawals from a non-qualified tax-deferred annuity may be 100% taxable as ordinary income because of LIFO (last in - first out) rule. When making an ordinary withdrawal permitted by the contract, an annuity holder withdraws gain before basis. The way around this is to "annuitize" the sum (in whole or in part), thereby receiving a portion of the basis with every income payment. Right?

Best wishes, PP
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