When it comes to annuities, people can have many questions. “What is the annuity exclusion ratio?” is a common one, especially for those considering immediate annuities. Many investors also ask about how the exclusion ratio may affect their tax burden in their retirement.
The exclusion ratio is an important number. It helps calculate the amount in each of your income benefit payments that won’t be taxable. Several investors like to know its basic ins-and-outs so they can get an idea of what their taxes will be.
What many people don’t know is that the annuity exclusion ratio may, in fact, reduce their overall tax liability. Since taxes can take a big bite out of retirement income, it certainly can pay off to understand this number and how it might impact you.
