Qualified Annuities
Funded with pre-tax retirement money, typically through an IRA or employer-sponsored plan rollover. Because the money hasn't been taxed yet, the entire withdrawal is generally taxed as ordinary income, and required minimum distribution (RMD) rules typically apply.
Non-Qualified Annuities
Funded with after-tax money outside of a retirement account. Only the earnings portion of withdrawals is generally taxable (on a LIFO basis), since your original premium was already taxed before you contributed it.
Why the Distinction Matters
It affects contribution rules, RMD requirements, and how withdrawals are taxed — an important distinction to clarify with your advisor before funding a new annuity.
Key Takeaways
- Qualified annuities are funded with pre-tax retirement money and are subject to RMD rules.
- Non-qualified annuities are funded with after-tax money, and only earnings are generally taxable upon withdrawal.
- Confirm which category applies to your funding source before purchasing.
This is general tax education, not personalized tax advice. Consult a qualified tax professional regarding your specific retirement accounts and tax situation.
Free Consultation
Have Questions About Your Situation?
Every situation is different. Our Wyoming and Utah advisors provide free, personalized guidance — no pressure, no obligation.