If you’re planning for retirement, you have probably noticed how many saving and investment options are available. One type of savings plan you may have heard of is a non-qualified annuity plan. Knowing the pros and cons of this option can help you determine if it is a good route on your personal financial journey.
Non-Qualified Annuity
What is a non qualified annuity? This type of annuity is funded with post-tax income and payments can be distributed immediately or postponed to a later date.
Advantages
Because it is paid for with money that has already been taxed, the principal amount will not incur income taxes. While taxes will be owed on the interest and earnings of your non-qualified annuity, your retirement status is likely to place you in a lower tax bracket, thus lowering the percentage of interest you will need to pay.
Disadvantages
Using post-tax earnings to fund your non-qualified annuity means the amount you pay for income taxes is higher than if you used pre-tax earnings. You will also be subject to a tax penalty if you withdraw the money early.
Money plays a large role in how you decide to spend your golden years. Making smart financial decisions now can get you closer to the retirement you’ve been dreaming of.
