Annuity

retirement

Also known as: annuity, fixed annuity, variable annuity, immediate annuity, SPIA

Updated · Written and reviewed by Konstantin Iakovlev

Detailed explanation

Tax treatment: contributions to non-qualified annuities are after-tax; growth is tax-deferred; withdrawals are LIFO (earnings first, taxed as ordinary income, plus 10% penalty if under 59½). Qualified annuities (inside an IRA/401(k)) follow IRA rules. SECURE Act 1.0 made it easier to offer annuities inside 401(k) plans (QLAC up to $200,000 in 2026 lets you defer RMDs to age 85 on annuitized portion). Variable annuities have notoriously high fees (3%+ all-in) and surrender charges; SPIAs from highly-rated insurers offer the cleanest "longevity insurance" pricing for retirees worried about outliving savings.

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