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When withdrawing funds, or outside of regular annuity payments, from a non-qualified annuity, the IRS uses the “last in, first out” rule for determining the taxable portion of your withdrawal.
Taxes are paid at ordinary income rates on withdrawals in retirement. Non-qualified annuities: Annuity contributions made with after-tax money are not taxable when distributed. In this type of ...
Category. Qualified Annuity. Non-Qualified Annuity. Investment. Pre-tax funds, often in association with IRA or other tax-deferred vehicles. After-tax funds.
Finally, early withdrawals prior to age 59 ½ from a qualified annuity face a 10% tax penalty on the full withdrawal. Non-qualified annuities will only see that penalty on earnings and interest.
If you use the money from a 401(k), 403(b), traditional IRA, SEP-IRA or SIMPLE IRA to purchase an annuity, it will be classified as a qualified annuity since those are all funded with pre-tax dollars.
Meanwhile, qualified annuities typically require you to start making minimum withdrawals at age 73, per IRS rules, the same as traditional IRAs and 401(k)s. Bottom line
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