As you research annuity contracts, it’s also important to pay attention to whether they’re “qualified” or “non-qualified.”
The IRS only regards qualified annuities as eligible for all the tax benefits available to retirement funds. Those are the funds to which you can contribute using pre-tax dollars.
As far as the tax authorities are concerned, non-qualified annuities are just a special kind of savings account. You can’t contribute to them using after-tax dollars but you can defer the earnings those savings generate. Instead of paying capital gains tax on the fund’s growth each year, the full value of fund’s growth will remain in your account. Those earnings will compound each year until you start making withdrawals after the age of 59.5.
At that point, you’ll need to pay income tax on those revenues.
- The Four Stages of Retirement
- When Can You Retire?
- How Much Will You Need to Save Before You Can Retire?
- How to Create a Retirement Savings Habit
- The Benefits and Costs of a Pension
- Retiring with a 401(k)
- The Benefits of a 401(k) Plan
- The Costs of a 401(k) Plan
- Vesting a 401(k) Plan
- 4 Types of 401(k)
- Rolling Over Your 401k
- Leave Your Old 401(k) with Your Old Employer
- How to Rollover Your 401(k)
- Individual Retirement Accounts—IRAs
- How an IRA Works
- Working Your IRA With Your 401(k)
- 3 Types of IRAs
- SEP IRA Limits
- Annuities
- The Benefits of an Annuity
- Deferred Annuities
- Immediate Payment Annuities
- Fixed Index Annuities and Variable Rate Annuities
- Qualified and Non-Qualified Annuities
- Changing Your Annuity—The Section 1035 Exchange
- The Limits of a 1035 Exchange
- How to Plan for Your Retirement
- How to Start Planning Your Retirement
