Fixed annuities can be purchased with qualified or nonqualified money.
Qualified (tax deductible contributions)
Qualified money is tax deductible and is often used with traditional IRAs and retirement plans. You benefit because you are able to defer taxes on your contributed amount until it is time to start taking withdrawals from your qualified account.
Beginning at age 70½, annuities purchased as qualified contracts must begin to take distributions determined by the IRS, called Required Minimum Distributions (RMDs). For qualified money, the entire distribution is taxed (at your current income-tax rate) at the time of the withdrawal. Symetra Life has many flexible income options to help you easily achieve your required minimum distributions while spreading out your taxable distributions.
Nonqualified (after-tax money contributions)
Nonqualified money includes any funds that have been previously taxed. If you buy your annuity with nonqualified funds, you still accrue tax-deferred interest throughout your lifetime. The benefit to purchasing an annuity with nonqualified, or previously taxed money, is that you are never required to take distributions at a certain age, as you are with a qualified account.
When you decide to make a withdrawal, only your earnings are taxed and, like with a qualified account, it is taxed at your current income tax rate. For nonqualified accounts, Symetra Life has many flexible income options that may help you minimize your total tax consequence by spreading your taxable earnings over a number of payments.
See also tax deferral
When you use an annuity to fund a retirement account that is tax-deferred, your annuity may provide other benefits, but will not provide any additional tax deferral for your retirement plan.
