As a student transferring funds from a nonqualified annuity to use toward tuition, will I be exempt from the 10 percent penalty?

by Scott Rubinsky, CPA | Nov 27, 2018

I'd like to transfer funds from a nonqualified annuity, but I am not 65. I am a student and would like to use the money for tuition. Will I be exempt from the 10 percent penalty? 

The age for the penalty for early withdrawal of a nonqualifying annuity is 59 ½, the same as retirement accounts. The penalty is only on the earnings from the nonqualifying annuity. Please be aware of any service charges that may apply when making a withdrawal within the first five to seven years. They can be very expensive.

I did not find any exceptions to rolling the money over, except for in cases of permanent and total disability.

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

Answered by: Scott Rubinsky, CPA, is a sole practitioner in Huntingdon Valley, Pa.

The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
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