Non-qualified annuities are purchased with money that has already been taxed—typically from savings, investment accounts, or other non-retirement sources. Because you've already paid tax on your contributions, only the earnings are taxable when you withdraw.
Key advantages of non-qualified annuities:
- No contribution limits (you can invest any amount)
- No Required Minimum Distributions (RMDs)
- Only earnings are taxed at withdrawal (not original contributions)
- Greater flexibility in timing withdrawals
- Can provide tax-efficient income through the exclusion ratio
The exclusion ratio determines what portion of each payment is a tax-free return of principal versus taxable earnings. This ratio is calculated based on your total investment and expected return, and it spreads the tax burden across all payments.
Non-qualified annuities are popular with high-net-worth individuals who have maxed out their qualified retirement accounts and want additional tax-deferred growth. For Ocala residents with substantial after-tax savings, a non-qualified annuity can be an effective way to create guaranteed retirement income while managing taxes.
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