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    Taxes & Annuities

    IRA vs Non-Qualified Annuities

    The way you fund your annuity — with pre-tax IRA dollars or after-tax savings — changes how it's taxed, how withdrawals work, and how RMDs apply.

    Side-by-side comparison of IRA and brokerage account documents
    How you fund an annuity changes how it's taxed in retirement.

    What Is a Qualified Annuity?

    A qualified annuity is funded with pre-tax dollars (IRA, 401(k), 403(b)). All withdrawals — principal and earnings — are taxed as ordinary income, and required minimum distributions apply.

    What Is a Non-Qualified Annuity?

    A non-qualified annuity is funded with after-tax money. Only the earnings portion of each withdrawal is taxed. There are no IRS-required distributions during your lifetime.

    Key Differences

    RMDs apply to qualified annuities starting at age 73 (under current law). Non-qualified annuities have no RMDs but follow the LIFO rule on withdrawals.

    Tax Planning Considerations

    Qualified annuities provide tax deferral on top of an already tax-deferred account — so they're chosen mainly for the income guarantees, not extra tax benefit.

    The Bottom Line

    Both can fit a plan, but for very different reasons. Choose based on the role the annuity will play, not just on tax mechanics.

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