Is An Annuity A Qualified Retirement Plan?

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July 3, 2013

Larry Gilmore

Is an annuity a qualified retirement plan? NO. An annuity can be “used” in or as part of a qualified retirement plan. An annuity on it’s own is not a qualified retirement plan. Where people get confused terminology wise is when they have a product (like an annuity) in their retirement plan, so they consider the annuity to “be” the retirement plan. The easiest way to think of retirement plans is they are a box, that stuff goes into. A qualified retirement plan is a box that you can put stocks, bonds, mutual funds and annuities into. The “box” is what makes them “qualified.”
July 2, 2013

David Racich

An annuity is inherently a non-qualified insurance product. A qualifies plan is generally an ERISA (The Employee Retirement Income Security Act of 1974) sanctioned retirement plan like an employer sponsored 401(k) or an individual plan like an IRA. You can fund a qualified plan with an annuity, but all distributions from the annuity in the qualified plan, including basis, are taxable as ordinary income.

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