Tax Preferred Payouts:
During the distribution
phase there can also be some favorable tax
arrangements. If over age 59 1/2, an individual
can take penalty free distribution from his
annuity. Of course, if an annuity is surrendered
on a lump sum basis, all gains will have to be
realized at that time. However, many annuitants
take either periodic withdrawals, or "annuitize"
with an immediate annuity. Either of these will
allow the gain to be realized over a longer
period of time, hopefully minimizing taxable
income in any given year. It is important to
note that when withdrawals are taken from an
annuity, the IRS requires earned interest to be
withdrawn before any principal can be
distributed. The original investment, however,
is considered return of premium and therefore
not taxable to the recipient.Additional Information on
Annuities:
Deferred Annuities
Immediate Annuities
Who Should Invest in an
Annuity? -Investor Profile
Tax Deferred Accumulation
 Tax Preferred Payouts
Guaranteed vs. Promises
Fees
Carrier's Financial
Strength
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