Retirement is a new beginning with endless opportunities for discovery and adventure. If you’re interested in expanding your retirement savings portfolio, you may be considering the purchase of a non qualified deferred annuity. Here’s what you need to know about tax-deferred annuities.
An After-Tax Investment
Unlike other contributions you can make to various retirement funds, you cannot use the purchase of a non qualified deferred annuity as a tax deduction. In the short term, this means that you’ve already paid taxes on the money you contribute to your non-qualified annuity. It’s an after-tax investment that has a unique benefit as a tax-deferred fund.
A Unique Tax Structure
You won’t pay tax on a non qualified deferred annuity until you decide to withdraw from the fund or want to start collecting regular payments. While the annuity grows, you don’t have to pay taxes on it. When you are using the funds, you will only pay taxes on the interest-earned portion. Your original contribution will not be taxed twice.
Purchasing an annuity is a smart and secure strategy to help you safeguard your retirement. Once you understand the structure and function of a tax-deferred annuity, you can make an informed decision on how to invest for your future.