What is a Variable Annuity?
A variable annuity is a long-term contact between you as the investor and the insurance company which combines investment and protection into a single financial products to help address your needs. They are designed to help provide you with retirement income.
There are generally two types of variable annuities: qualified and non-qualified. If a variable annuity is purchased through an IR or other qualified plan it will not provide any additional tax advantages (other than the advantages which that plan already provides). Non qualified annuities avoid income tax fees until distributions are made.
Purchases & Withdrawals
Withdrawals will first come from any contract gains and may reduce the death benefit, optional benefits or contact value. Taxable distributions are subject to ordinary income tax and may be subject to a federal income tax penalty if made prior to 59 1/2 years of age. Certain qualified plans may require distributions to begin by age 70 1/2.