April 16, 2024
James Conole, CFP®
Episode 211

Lump Sum vs. Annuitization: Tax Implications for Your Non-Qualified Annuity

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Ready For Retirement

Lump Sum vs. Annuitization: Tax Implications for Your Non-Qualified Annuity

Apr 16, 2024
Episode 211

James Conole, CFP®

Joe is planning for retirement and wants to minimize his tax burden, especially on the interest earned from his three annuities. James explains that non-qualified annuities are purchased with post-tax money and offer tax deferral on growth until withdrawal. When taking out funds, the principal is tax-free, but earnings are taxed at ordinary income rates.

He explores strategies for tax-efficient withdrawals. He also touches on annuities, options like a 1035 exchange to transfer an annuity into a different product for improved performance, the tax implications for heirs, and early withdrawal penalties before age 59 and a half.

Questions Answered:

How are non-qualified annuities taxed upon distribution, including both lump sum and annuity options?

What strategies can be implemented to keep the tax burden as low as possible when withdrawing from non-qualified annuities?

Timestamps:

0:00 - Joe’s question

1:52 - Non-qualified annuity overview

5:11 - Potential tax strategies

10:02 - Annuitization option

12:31 - Annuity regret

13:22 - 1035 Exchange

14:33 - Things to know

Create Your Custom Strategy ⬇️

Joe is planning for retirement and wants to minimize his tax burden, especially on the interest earned from his three annuities. James explains that non-qualified annuities are purchased with post-tax money and offer tax deferral on growth until withdrawal. When taking out funds, the principal is tax-free, but earnings are taxed at ordinary income rates.

He explores strategies for tax-efficient withdrawals. He also touches on annuities, options like a 1035 exchange to transfer an annuity into a different product for improved performance, the tax implications for heirs, and early withdrawal penalties before age 59 and a half.

Questions Answered:

How are non-qualified annuities taxed upon distribution, including both lump sum and annuity options?

What strategies can be implemented to keep the tax burden as low as possible when withdrawing from non-qualified annuities?

Timestamps:

0:00 - Joe’s question

1:52 - Non-qualified annuity overview

5:11 - Potential tax strategies

10:02 - Annuitization option

12:31 - Annuity regret

13:22 - 1035 Exchange

14:33 - Things to know

Create Your Custom Strategy ⬇️