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A non qualified annuity is not part of any employer plan and all contributions are made with after tax dollars. For this reason, they are not quite as popular as a tax sheltered annuity or a typical 401k. There are not many advantages to contributing to a non qualified annuity, other than securing your income stream during retirement.
In addition to the retirement aspect, many people choose a non qualified annuity as it is very difficult to seize this type of investment. The only exception is the Federal Government, but they can pretty much seize whatever they want whenever they want.
For the above reasons, this type of annuity is popular with small business owners. They obviously do not have an employer based plan and they like the idea of having the guaranteed income during their retirement years. The other major draw is if their business is sued, and the plaintiff is allowed to pierce the corporate vale, the business owners annuity will remain protected.
The last reason why someone would purchase a non qualified annuity is if they are responsible for someone else. It is common for someone to purchase a non qualified annuity for their children that have not reached adulthood yet. Some people cringe at the thought of leaving their teenager their entire net worth in one lump sum. The annuity is the perfect option as you can defer the annuity until the child reaches the appropriate age.
Of course, if you purchase an annuity for someone else, you don’t have to worry about them going completely broke, by making bad investments or bad decisions. In the event that the beneficiary receives the non qualified annuity due to your death, there may not be any tax consequences either.
Regardless of which annuity type you choose, the main thing is that you choose one. If you have any concerns about receiving a livable income during your retirement years, an annuity is the best way to go. There are a million things that could happen to an investment portfolio between now and then, but the annuity will always be there when you need it.
Even a 401k can be subject to the whim of the stock market. Many people have been hurt by the stock market crashing days, weeks, or months before their retirement. Even worse is when people put all of their 401k dollars into the company they worked for to later find out the company is bankrupt and their entire retirement nest egg has been wiped out.
The simple answer is a tax sheltered annuity if you are an employee and a non qualified annuity if you are a business owner or a contractor. This is virtually the only way you can guarantee a livable income during you retirement. If you start making your investments as soon as you can, you should expect more than a comfortable existence when you decide to begin taking monthly or quarterly payments.
