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Originally Posted by Gigi3000
You're right. I looked at ordinary income but this is long term capital gains. Do you know if you pay short term gains inside of an annunity?
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Any income that you make in an annuity and withdraw will be taxed as ordinary income. That is one of the major disadvantages of annuities that many advisors neglect to tell you when they sell it to you. They claim that you are investing in the stock market but you don't get the advantage of the lower capital gains rate that you would normally receive outside of an annuity. But, all short term gains (less than a year) are taxed as ordinary income. So, to benefit from the lower capital gains rate outside of an annuity, you need to hold the investment for at least one year.
I would seriously consider just paying the capital gains tax and invest the money in a conservative portfolio of Vanguard index mutual funds. 30 percent S&P 500 Index Fund, 30 percent Short Term Bond Index Fund, and 40 percent money market fund. Then, do some independent research on investing before making any more financial decisions.