Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
A qualified annuity is one that is a part of a qualified retirement plan. For most people that means an IRA, Roth IRA, 401(k), 403(b) or similar plan. The rules governing the treatment of the tax annuity are contained in the appropriate sections of the Internal Revenue Code. A non-qualified annuity is not a part of a qualified retirement plan.
Life & Health Insurance Agent, The Tooker Agency, Riverhead NY
A qualified annuity will have the tax characteristics of the particular type of plan it is (IRA, Roth IRA etc.).
A non qualified annuity has it's own tax characteristics. Many of those characteristics are similar to qualified plans, but there are some that are unique to non qualified annuities.
- There is no maximum annual contribution. You can invest as much as you would like into a non qualified annuity
- Unlike in a qualified plan, the IRS does not force you to start taking withdrawals at age 59 1/2 or at any age
- If you annuitize, your tax burden will be spread out over the withdrawal period. Instead of being taxed as earnings first, each payment will be taxed as being made up of both some earnings and some return of basis. This tax exclusion ratio is calculated at the time you annuitize.
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A non qualified annuity has it's own tax characteristics. Many of those characteristics are similar to qualified plans, but there are some that are unique to non qualified annuities.
- There is no maximum annual contribution. You can invest as much as you would like into a non qualified annuity
- Unlike in a qualified plan, the IRS does not force you to start taking withdrawals at age 59 1/2 or at any age
- If you annuitize, your tax burden will be spread out over the withdrawal period. Instead of being taxed as earnings first, each payment will be taxed as being made up of both some earnings and some return of basis. This tax exclusion ratio is calculated at the time you annuitize.