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"1.First Question, I've been told that due to my retirement plans through work niether of us are elligable to setup a tax deferred IRA, is that correct?"

If you are both covered by a retirement plan then your AGI is too high to permit a traditional tax deferred IRA - but your AGI is less than $150,000 which would permit each of you to contribute $2,000 to your own Roth IRA accounts.

"2. To cash out the Annunity won't be too painful only approx. $800 in penalities. What sould I do to get this money in a retirement account where I can have control over the money and not get mutual funds shoved down my throat as investment options? "

If the annuity was in a 401K or IRA, it can be rolled-over (401K to traditional IRA) or the assets transferred (Traditional IRA to Tradional IRA) to a either a self directed or mutual fund IRA account with no tax nor penalty. If the annuity is not within a a 401K or IRA, gains on the distribution will be taxed. The funds can not moved into an IRA but this could provide $4,000 for yearly contributions to a ROTH IRA.

"3. If I cash out the annunity how much of the money can be invested into a ROTH IRA?"

Explained above. $2,000 for you and $2,000 for your wife if you earn $4,000 in 1999. In January,2000, you can add another $2,000 for you and $2,000 for your wife assuming that one of you will earn at least $4,000 and the two of you will not have an AGI over $150,000.

"4. The original investment into the annunity was an after tax investment, if we were able to put the money in an ROTH IRA would we have to pay taxes on that money again, or just on the money that has been earned since in the annunity?"

I believe only the gains on annuity are taxed at regular income tax rates. The initial investment is not taxed. I could be wrong on this part.


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