Earnings gained through annuities are not taxed while money is growing, even if the annuity owner switches between subaccounts or insurance companies. Taxes are due, as ordinary income, upon withdrawal of any gain. “Enroll” in the Taxes portion of our lessons for the do’s and don’ts on exchanges. Remember, there is a 10% penalty on withdrawal of earnings from an annuity before the age of 59 ½. Subaccounts are similar to mutual funds. Each subaccount has its own degree of risk, from aggressive growth funds to bond or specialty funds.