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Greetings, StoneyCreek, and welcome. You asked:

<<I purchased single premium annuities for my wife and myself over ten years ago. They are dogs earning only 4%-5% a year. Can someone tell me if I can cancel the annuities and purchase Roth IRA's without paying any penalties or taxes? >>

If these are run of the mill annuities (i.e., not ones you purchased inside of an IRA or retirement plan), then you may certainly surrender them. When you do, you may be subject to surrender fees (some last longer than 10 years). After you deduct those fees and the money you put into the annuities, anything left over is a gain that will be taxed at ordinary income tax rates. Additionally, for those under age 59 1/2, a 10% early withdrawal penalty will be assessed on those gains. The proceeds cannot be transferred to an IRA. The best you can do in that area is to use that money towards your annual $2K IRA contribution instead of money from your earned income (i.e., job wages). If you wish to avoid taxes and any possible penalty, you might investigate what's called a 1035 exchange from your existing annuity to another with lower fees and better returns. If the latter interests you, then check out those offered by Vanguard, T Rowe Price, and TIAA-CREF. The latter is not available in all states.

Regards..Pixy
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