qualifying annuity

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Qualifying annuity

Qualifying Annuity

An annuity that one buys along with one's employer. That is, the annuitant and his/her employer both make tax-deferred contributions to the plan for a certain period, with withdrawals coming upon retirement. If the annuitant begins withdrawals before a certain age, withdrawal penalties apply. One may continue to make contributions until a certain age, usually around 65.

qualifying annuity

An annuity approved by the Internal Revenue Service in which the contributions may be deducted from taxable income. The effect of contributing to a qualifying annuity is deferred taxes on the contributions from the time the contributions are made to the time any withdrawals are made. Qualifying annuities are used for individual retirement accounts, Keogh plans, and profit-sharing plans. Compare nonqualifying annuity.