If a retirement plan or annuity is qualified, this means what?

A qualified retirement plan or annuity satisfies specific requirements set forth by the Internal Revenue Service (IRS), which allows it to receive favorable tax treatment. This typically includes tax-deferred growth on earnings until withdrawals are made, as well as possible tax deductions for contributions made to the plan, depending on the type of plan and the individual’s situation.

Such plans are designed to encourage savings for retirement, as they come with rules that govern contributions, withdrawals, and tax implications. Meeting these IRS criteria is essential for the plan or annuity to be considered "qualified." This status is crucial for individuals looking to maximize their retirement savings in a tax-efficient manner, ensuring that they are aware of and can benefit from tax advantages linked to such plans.

In this context, affordability, withdrawal penalties, and contribution limits may apply to various types of retirement plans but do not define whether the plan is qualified as per IRS standards.