Non-qualified means that there is no tax deduction for the premiums paid. There is, however, the benefit of tax-deferred growth in the annuity. And upon annuitization a portion of the payments will be considered a non-taxable return of premium.
Qualified tax status refers to individual retirement accounts (IRAs) and employer-sponsored savings plans like 401(k)s and 403(b) tax-sheltered annuities. These receive special IRS tax treatment, including possible tax deduction for premiums or contributions in addition to the benefit of tax-deferred growth.
14274-D (06/08)
Note that a 10% IRS penalty may apply to any withdrawals taken prior to age 59½; this penalty would be in addition to any normal taxation of the withdrawal.
The following applies if the annuity is purchased through a bank or a credit union: (a) the annuity is not a deposit; (b) the annuity is not guaranteed by any bank or credit union; (c) the annuity is not insured by the FDIC or any other governmental agency; (d) the purchase of an annuity is not a provision or condition of any bank or credit union activity; and (e) some annuities are subject to investment risk and may go down in value.
Product availability varies by state.