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Qualified Annuity

What is a 'Qualified Annuity'

A qualified annuity is a financial product that accepts and grows funds, and is funded with pre-tax dollars. "Qualified" is a descriptor given by the Internal Revenue Service (IRS) to indicate that the qualified annuity may be eligible for tax deduction. When a distribution is made, it is subject to income tax.

Explaining 'Qualified Annuity'

A qualified annuity differs from a non-qualified annuity, which is an annuity funded with after-tax dollars. While distributions from a qualified annuity are taxed as income, distributions from a non-qualified annuity are not subject to income tax in their entirety. Qualified annuities are often set up by employers on behalf of their employees as part of a retirement plan.


Further Reading


Developments in decumulation: The role of annuity products in financing retirement
link.springer.com [PDF]
… of these group programs provides insights regarding the feasibility of purchasing annuities with the … that that these rules do not substantially affect the private demand for annuity products … chapter also sketches the complex tax rules that govern payouts from qualified accounts in …

Household ownership of variable annuitiesHousehold ownership of variable annuities
www.journals.uchicago.edu [PDF]
… of these group programs provides insights regarding the feasibility of purchasing annuities with the … that that these rules do not substantially affect the private demand for annuity products … chapter also sketches the complex tax rules that govern payouts from qualified accounts in …

Household demand for variable annuitiesHousehold demand for variable annuities
papers.ssrn.com [PDF]
… of these group programs provides insights regarding the feasibility of purchasing annuities with the … that that these rules do not substantially affect the private demand for annuity products … chapter also sketches the complex tax rules that govern payouts from qualified accounts in …

Lifecycle impacts of the financial and economic crisis on household optimal consumption, portfolio choice, and labor supplyLifecycle impacts of the financial and economic crisis on household optimal consumption, portfolio choice, and labor supply
www.nber.org [PDF]
… of these group programs provides insights regarding the feasibility of purchasing annuities with the … that that these rules do not substantially affect the private demand for annuity products … chapter also sketches the complex tax rules that govern payouts from qualified accounts in …

Lessons from behavioral finance for retirement plan designLessons from behavioral finance for retirement plan design
books.google.com [PDF]
… of these group programs provides insights regarding the feasibility of purchasing annuities with the … that that these rules do not substantially affect the private demand for annuity products … chapter also sketches the complex tax rules that govern payouts from qualified accounts in …

Betting on death and capital markets in retirement: a shortfall risk analysis of life annuitiesBetting on death and capital markets in retirement: a shortfall risk analysis of life annuities
www.nber.org [PDF]
… of these group programs provides insights regarding the feasibility of purchasing annuities with the … that that these rules do not substantially affect the private demand for annuity products … chapter also sketches the complex tax rules that govern payouts from qualified accounts in …

Annuities and their derivatives: The recent Canadian experienceAnnuities and their derivatives: The recent Canadian experience
papers.ssrn.com [PDF]
… of these group programs provides insights regarding the feasibility of purchasing annuities with the … that that these rules do not substantially affect the private demand for annuity products … chapter also sketches the complex tax rules that govern payouts from qualified accounts in …

Financial incentives and retirement: evidence from federal civil service workersFinancial incentives and retirement: evidence from federal civil service workers
www.sciencedirect.com [PDF]
… of these group programs provides insights regarding the feasibility of purchasing annuities with the … that that these rules do not substantially affect the private demand for annuity products … chapter also sketches the complex tax rules that govern payouts from qualified accounts in …

Variable annuities versus mutual funds: a Monte-Carlo analysis of the optionsVariable annuities versus mutual funds: a Monte-Carlo analysis of the options
www.sciencedirect.com [PDF]
… of these group programs provides insights regarding the feasibility of purchasing annuities with the … that that these rules do not substantially affect the private demand for annuity products … chapter also sketches the complex tax rules that govern payouts from qualified accounts in …



Q&A About Qualified Annuity


Are distributions from a qualified annuity taxed as income?

Yes, they are taxed as income.

Is a distribution from a non-qualified annuity subject to income tax in its entirety?

No, it isn't entirely subject to income tax.

Who developed the modern concept of a life annuity?

Benjamin Gompertz in 1825.

Who sets up qualified annuities on behalf of employees?

Employers set up qualified annuities on behalf of their employees as part of retirement plans.

What does the IRS consider when determining if an annuity is qualified?

The IRS considers whether or not the annuity may be eligible for tax deduction.

What are the different types of life annuities?

There are two main types of life annuities, single-payment and flexible payment.

When was Ulpian credited with generating an actuarial table for a life annuity?

Between AD 211 and 222.

What is a qualified annuity?

A qualified annuity is a financial product that accepts and grows funds, and is funded with pre-tax dollars.

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