Annuities✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
A key difference between a nonqualified annuity and an IRA is that a nonqualified annuity:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Nonqualified annuities are funded with after-tax dollars and are not subject to the annual contribution limits that apply to IRAs and qualified plans. An owner may put any amount into a nonqualified deferred annuity. The tax advantage comes from tax-deferred accumulation of the earnings, not from a deduction for the premiums. IRAs, by contrast, have annual contribution caps set by federal law.
Why the other options are wrong
- B) Premiums into a nonqualified annuity are paid with after-tax money and provide no current income tax deduction.
- C) Nonqualified annuities are not subject to RMD rules and have no mandatory distribution age.
- D) Nonqualified annuities are usually purchased with an individual's own after-tax funds, not employer pre-tax dollars.
Memory hook
Nonqualified annuity = no ceiling on deposits, no deduction, tax-deferred growth. Bring your own after-tax money.