No matter how old you are, it’s never too early to start thinking about your income after you retire. An annuity is an excellent vehicle to invest in now, so you can reap the rewards later. A nonqualified annuity is a unique financial vehicle to let you do just that.
What Is a Nonqualified Annuity?
A nonqualified annuity is one where you pay into it with after-tax money and let it grow with the interest earned being tax-deferred. Only when you withdraw funds after you’ve retired, is the interest taxable. The principal is not; you’ve already paid the taxes on it.
A nonqualified annuity is different from a qualified annuity. In a qualified annuity, pre-tax dollars are invested and the entire amount of principal and interest is taxable when withdrawn.
Think of a nonqualified annuity like a bank account where you can’t make withdrawals until you reach a certain age. Once you’ve reached that age, you can make regular withdrawals for the rest of your life, and only pay tax on the interest accrued.
A nonqualified annuity is a different type of annuity than maybe you’re used to hearing about. Your invested after-tax dollars grow interest during the accumulation period so that you have more money to withdraw from in retirement. Contact your financial advisor to determine which is the better investment for you.