Lump Sum vs. Annuitization: Tax Implications for Your Non-Qualified Annuity
- Lump Sum vs. Annuitization: Tax Implications for Your Non-Qualified Annuity James Conole, CFP® 17:43
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
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