A type of annuity offered outside of a tax-favored employer-sponsored retirement plan to which contributions are made with after-tax dollars. Taxes on earnings and interest are deferred until withdrawal or when annuity payments begin, usually at retirement.
"Non-qualified" refers to the fact that the particular annuity is not part of a qualified retirement plan or IRA and is purchased with after-tax dollars. In contrast, a "qualified" annuity is part of an employee benefit plan that has met certain requirements under the Internal Revenue Code, and is purchased with pre-tax dollars.
An annuity contract you buy individually rather than as part of an employer-sponsored qualified retirement plan. You pay the premium with post-tax dollars. With a deferred nonqualified annuity, your principal grows tax-deferred.