Annuity

An annuity is a long-term retirement savings product that can help protect you from outliving your money. It has the potential to grow tax-deferred, has death benefits to protect your beneficiary and optional living benefits to protect your retirement income. You can choose how to fund your annuity, how interest is credited to it and how you take payments from it.

A Non-qualified Annuity is an annuity purchased with after-tax dollars. A Qualified Annuity is one purchased with pre-tax dollars, such as in an IRA or a TSA (Tax Sheltered Annuity).

In a Qualified Annuity, all of the money would be subject to income tax upon IRS/investment lingo for pre-tax money. It is important to note that the money placed in a 401(K) For Profit, 403(b) and IRA, SEP accounts must be earned income.

Taxes in an annuity are deferred until you use the money—see the money.

Non-qualified withdrawal: In a Non-qualified Annuity, only the gains would be taxed. Gains are tax-deferred, so you pay your income tax rate, not capital gains taxes. The original amount invested is not subject to tax when you withdraw it.

Annuities are investments through insurance companies and many different types are available. Learn the companies and their products thoroughly!