Annuities are investment vehicles backed by various types of investments. They have many different labels for the same product. For instance, an annuity can be an immediate annuity, a fixed annuity, and a non-qualified or qualified annuity.
Although there are several different labels, most annuities fall under three categories: fixed, variable or indexed. The terms describe the type of funding used inside the annuity.
If you have money in a pension, IRA, 401(k) or 403(b), the money is qualified money. It simply means it's for retirement and you have special rules about removing it.
Money without the pension or IRA designation is non-qualified money. You don't have to wait to remove it until retirement in most cases, except for a non-qualified annuity.
If you have a qualified annuity in any plan but the Roth IRA, you must start to take money at least by 701/2. If you don't, there's a penalty. This isn't true of a non-qualified annuity or a qualified annuity in a Roth IRA.
Non-qualified annuities are not subject to limitations on the amount you can invest each year. Qualified annuities have limits based on the type of plan they fund.
If you invest in a qualified annuity, there are restrictions based on your income. For IRAs, if you earn over a maximum amount and have another pension you're ineligible to contribute. Most pensions are percentages of income. You can earn any amount and have a non-qualified annuity.
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