What's the difference between a qualified and non-qualified annuity?
A qualified annuity is a contract you purchase with pretax money. Any withdrawals are subject to income taxes because that money hasn't been taxed before. A non-qualified annuity is purchased with after-tax money. In that case, only the earnings are taxed upon withdrawal, and some tax benefits may be available if you annuitize a non-qualified annuity. With either type of annuity, withdrawals before age 59½ can potentially result in tax penalties on the taxable portion of any distribution.