Lump Sum vs. Annuitization: Tax Implications for Your Non-Qualified Annuity

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 Create Your Custom Strategy ⬇️ Get Started Here. Join the new Root Collective HERE!