An annuity you buy on your own, rather than through a qualified employer sponsored retirement plan or individual retirement arrangement, is a nonqualified annuity.
Nonqualified annuities aren't governed by the federal rules that apply to qualified contracts, such as annual contribution caps and mandatory withdrawals after you turn 70 1/2.
While there may be a 10% tax penalty for withdrawals before you turn 59 1/2, you can generally put up to $1 million in an annuity and postpone withdrawals until you're 75 or 80 or older. Those limits are set by the state where you purchase the contract or by the annuity company.
In other ways, though, qualified and nonqualified annuities are alike. You can choose between fixed or variable contracts, and the annuity can be either deferred or immediate.
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