Qualified and Non-Qualified Annuities

Free CFP Exam lesson in Risk Management and Insurance Planning. 15 min read, ~2,209 words.

Non-qualified partial withdrawals = LIFO (earnings first, fully taxable until all gain is withdrawn); 10% penalty on the taxable portion if under 59-1/2 (exceptions: death, disability, SEPPs). Non-qualified annuitization = exclusion ratio (investment in contract / expected return = tax-free fraction). Qualified annuities (IRA/401(k)) have no basis, so 100% taxable...