A qualified annuity is an annuity contract purchased with pre-tax dollars inside a tax-advantaged retirement vehicle such as a traditional IRA, 401(k), 403(b), or other qualified plan. Contributions or rollovers into the annuity are generally tax-deferred until distributions are taken, at which point payouts are taxed as ordinary income. Qualified annuities can be fixed, indexed, or variable and may include income riders or guaranteed lifetime withdrawal benefits. Because the tax deferral benefit already exists within qualified accounts, the primary rationale for using an annuity there is to obtain guarantees, income features, or investment structures not otherwise available in the plan or custodial platform.

Advisors recommend qualified annuities for clients who want more predictable income, downside protection, or structured withdrawal features inside retirement accounts. They compare product options, fees, and guarantees to existing investment choices and document why the annuity adds value beyond basic mutual funds or ETFs. Suitability and best-interest reviews focus on time horizon, liquidity needs, risk tolerance, and fee reasonableness. Advisors also coordinate with plan rules and custodians to ensure transfers and required minimum distributions are handled correctly. Clear explanation of qualified annuities helps clients understand that the annuity wrapper provides insurance benefits and guarantees, while the underlying tax treatment follows the existing rules for qualified retirement accounts.