Traditional IRAs

• An annuity may be purchased inside of a traditional IRA and is subject to the rules of the IRA. A traditional IRA is an IRA that allows contributions from your bank account; contributions are made on an after-tax basis. A tax deduction is then taken at the end of the year in an amount equal to the contribution. The deduction amount can't exceed $5,000 if you're under age 50, and $6,000 if you're 50 or over. Alternatively, you may make nondeductible contributions to a traditional IRA using IRS Form 8606.
  
  

403b Accounts

• 403b accounts are retirement accounts that are set up for government workers and nonprofit organizations. Specifically, a 403b account is often used as a supplement to a teacher's retirement pension. These accounts are usually funded using annuities as the investment vehicle; contributions are made on a pretax basis. This means that money is deducted from the individual's paycheck prior to taxes being deducted. Contribution limits to these annuities are restricted to the lesser of $49,000 or 100 percent of the employee's annual compensation.
  
  

Roth IRA

• Roth IRAs are IRAs that don't allow deductible contributions. An annuity purchased inside of a Roth account is subject to the same rules as the Roth. Contributions are made from a bank account but may be made by any method as long as the contribution is a cash-based contribution. Withdrawals are tax-free during retirement, which is why contributions are nondeductible. Contributions are limited to $5,000 for those under age 50, and $6,000 for those 50 and over, just like traditional IRAs.
  
  

SEP & SIMPLE IRAs

• SEP and SIMPLE IRAs are employer-based IRAs that may invest in various assets, one of which is an annuity. The annuity is subject to the restrictions of the account. These retirement accounts allow pretax contributions through salary reduction. An employer makes the contribution to the individual's account on his behalf before taxes are taken out. The contributions for SEP IRAs are limited to 25 percent of an employee's compensation, up to a maximum of $49,000, as of February 2011. SIMPLE contributions are limited to $11,500 per year.