Group Life & AnnuitiesQuestion 694 of 716
The exclusion ratio for an annuity payout is calculated as the:
a.Investment in the contract (cost basis) divided by the expected total return
b.The annuity's surrender charge divided by its remaining accumulated cash value at the time of payout
c.Death benefit divided by the annuitant's age
d.Total premiums divided by the current interest rate
Explanation
The exclusion ratio is the cost basis divided by the expected return; it determines the tax-free portion of each annuity payment. The rest of each payment is taxable earnings.
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Reviewed by John Zihao Zhang — California-Licensed Life Insurance Agent (CA Dept. of Insurance License #4396095 — verify)