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24/7 Wall Street Key Points. The differences between qualified and non-qualified annuities can be likened to the differences between IRAs and Regular Post-Tax investments
Finally, a key difference between qualified and nonqualified annuities is RMDs. With nonqualified annuities, there are generally no RMDs. Money can sit tight all through your retirement.
Retirement plans are classified as either defined benefit plans or defined contribution plans, depending on how benefits are determined.. In a defined benefit (or pension) plan, benefits are calculated using a fixed formula that typically factors in final pay and service with an employer, and payments are made from a trust fund specifically dedicated to the plan.
However, nonqualified annuities provide more flexibility than qualified ones since they don't require minimum distributions at any age. You can let your money continue growing tax-deferred as long ...
A non-qualified deferred compensation plan or agreement simply defers the payment of a portion of the employee's compensation to a future date. The amounts are held back (deferred) while the employee is working for the company, and are paid out to the employee when he or she separates from service, becomes disabled, dies, etc.
In the U.S., the tax treatment of a non-qualified immediate annuity is that every payment is a combination of a return of principal (which part is not taxed) and income (which is taxed at ordinary income rates, not capital gain rates). Immediate annuities funded as an IRA do not have any tax advantages, but typically the distribution satisfies ...