• Joshua Crowe, Contributor

  • March 22, 2018 views
  • Owner of Sunpath Financial, 15-years experience in finances, ten years in individual and corporate tax, Author or "The Ultimate Guide to Retirement", Forbes award winner for top 25 Retirement Articles 2019.
  • Opinions expressed by Sunpath Contributors are their own.

Takes a lump-sum contribution and converts it into a guaranteed lifetime income. Payments will start the following month the contribution is made, hence its name ‘immediate’.

The income amount is based on the contribution size, the age of the annuitant, and prevailing interest rates. A large payment from an older individual in a high-interest rate environment would provide large payout. A small contribution from a younger individual in a low interest rate environment would produce the small payout.

Funding an immediate income annuity with Qualified or Non-qualified Funds.

How you’ll pay tax on your annuity depends rather the money you used to fund it is qualified or non-qualified.

Qualified Immediate Annuities

If the annuity is funded with money that has not been taxed, it’s considered a “qualified” for IRS execution from income taxes. The whole monthly payment received from an immediate annuity (since income tax has not been paid). Qualified annuities can be funded from corporate-sponsored retirement plans such as Defined Benefit or Defined Contribution, Lump Sum distributions from such retirement plans, or from individuals arrangements like IRAs, SEPs, and Section 403(b) tax-sheltered annuities, or Section 1035 annuity or life insurance exchanges.

Non-qualified Immediate Annuities

Non-Qualified annuities are funded with monies that has not enjoyed the benefit of a tax-free status or exception and for which taxes have already been paid. Each payment received is considered a repayment of of previously taxed principal and therefore excluded from taxation. Non-qualified annuities are traditionally purchased by individuals investing their money market accounts, CD’s, after-tax savings, proceeds from the sale of a property, mutual funds, business, other investments, or from a life insurance payout.

Recent Post

Market Update: September 21st, 2020

Vaibhav Meswani September 21, 2020

Market Update: September 18th, 2020

Vaibhav Meswani September 18, 2020

Market Update: September 17th, 2020

Vaibhav Meswani September 17, 2020

Market Update: September 16th, 2020

Vaibhav Meswani September 16, 2020

[Webinar]: Maximize Your Retirement Lifestyle

Vaibhav Meswani September 16, 2020

Market Update: September 15th, 2020

Vaibhav Meswani September 15, 2020