Annuities can be classified as either qualified or non-qualified, and the distinction comes down to whether or not the annuity is used in connection with a tax-advantaged retirement plan.

Examples of tax-advantaged plans include defined benefit plans, 403(b), and 401(k) retirement plans or IRAs.

We offer a number of annuities and products that are funded with after-tax contributions. This means that contributions made into these types of annuities are not deductible from your gross income for income tax purposes.

When it comes to taxation on your non-qualified annuity, withdrawals come first from any earnings, which are taxed at your ordinary income rate. Once all the earnings have been distributed, the amount that represents what you paid into your contract is then tax-free.

Keep in mind that if you elect an annuity payout option, one portion of each payment comes from your original investment (which isn’t taxed) while the other portion comes from earnings and is taxed at your ordinary income tax rate. 

Please consult your own tax adviser regarding your personal situation and the applicable tax consequences of purchasing, owning, and receiving payments under an annuity. 

There is no additional tax-deferral benefit for an annuity contract purchased in an IRA or other tax-qualified plan. 

Security Benefit, its affiliates and subsidiaries, and their respective employees and representatives, do not provide tax, accounting, or legal advice. Any statements contained herein concerning taxes were not intended as and should not be construed as tax advice, nor should they be used for the purpose of avoiding federal, state, or local taxes and/or tax penalties. Please seek independent tax, accounting, or legal advice. 

Services offered through Security Distributors, a subsidiary of Security Benefit Corporation (Security Benefit).