Non-qualified variable annuities offer the potential for tax-deferred earnings, so you have the possibility of a steady flow of income after retirement. Non-qualified annuities are contributions to your retirement funded with after-tax dollars, so you already paid taxes on them. Your earnings will grow tax-deferred until withdrawn, and there is no required minimum distribution at age 70.

When you withdrawal the money for your retirement, the earnings are taxed only as ordinary income. After retirement, because your income is typically lower, you are taxed at a lower rate, helping you save money. You can purchase non-qualified annuities even if you are already covered by a retirement plan through your employer, or if you are also contributing to either a traditional IRA or a Roth IRA.

You can receive your non-qualified variable annuity as a lump sum payment, fixed payments for life, or a fixed amount for a specified period of time. If you get a lump sum payment, you could significantly increase your tax liability, especially if the lump sum pushes your income high enough to push you into the next tax bracket. The fixed payment alternatives will spread out your tax liability over time, making it much less likely that you will be moved into the next tax bracket.