The non-qualified annuity market consists of annuities purchased with after-tax dollars to meet longer-term wealth accumulation or retirement planning needs – with emphasis on longer-term.
As discussed previously, deferred annuities may not be appropriate for shorter-term wealth accumulation purposes – generally those that will materialize before age 59 1/2; while immediate annuities are designed to provide long-term income – that is, income guaranteed for life.
Non-qualified annuities are used to fund cash accumulation programs that do not qualify for a front-end tax deduction; but whether an annuity is qualified or non-qualified its premiums always accumulate interest free of current income tax until withdrawn. For annuities in a qualified plan, there is no additional tax benefit. Therefore, the client should value other features of the annuity. But non-qualified annuities also allow owners to continue tax deferral beyond the age 70, the mandatory withdrawal age for traditional IRA's and qualified retirement plans.
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