An annuity is a retirement financial tool. Unlike many retirement tools, though, annuities are contracts between you and an insurance company, rather than with banks or investment companies. You can buy an annuity in two ways: either by making a lump-sum payment to the insurance company or by paying into it regularly (say once a month).
There are many types of Annuities.
When you purchase an annuity from an insurance company it is referred to as an Individual Retirement Annuity (IRA).
When you purchase from a bank it is called an Individual Retirement Account (IRA).
Funds that are place into an annuity are either Qualified or Non-Qualified.
Qualified Funds means that the funds are qualified to be taxed when you take them out, so you put them in Pretax. For example a rollover from a 401k are Qualified funds.
Non-Qualified funds are funds you place from you bank account or they have already been taxed and you placed them into the annuity after tax.
Funds in an annuity grow tax-differed or tax free in the case of a Roth IRA. Please review specifics of Annuity types like Traditional IRA vs Roth before purchasing
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