I have a question:
I have a variable insurance policy that I will be rolling over via 1035 exchange into a low cost variable annuity at Vanguard. The cost basis of the variable insurance policy is $50k. The cash value of the policy is $35k.
If I sell / cash out the variable annuity in hypothetical 10 years (before I'm 59 1/2) when the cash value of the annuity equals the cost basis - both are at $50k - will I have to pay the IRS a 10% penalty for cashing the annuity in before reaching the age of 59 1/2?
I've heard some conflicting advice on this matter and am interested in what others have to say.
Have a great day,