What is a Qualified Annuity? Benefits, Taxes and More [Video]

A qualified annuity is a powerful tool designed to help you save for retirement while taking advantage of tax benefits. But what exactly is a qualified annuity, and how does it differ from other retirement savings products? In this guide, we’ll explore the ins and outs of qualified annuities, including how they work, their tax advantages, and whether they fit into your long-term financial plan.

What is a Qualified Annuity?

A qualified annuity is an annuity purchased with pre-tax dollars through a tax-advantaged retirement account like a 401(k), IRA, or another employer-sponsored plan. Since contributions to a qualified annuity are made with pre-tax dollars, the money you invest isn’t taxed until you begin withdrawing it during retirement.

Qualified annuities are part of qualified retirement plans and follow the same tax rules as accounts like 401(k)s or traditional IRAs,where contributions reduce your taxable income, and the earnings grow tax-deferred until withdrawal. This tax-deferred growth allows …