Natasha, age 58, purchases an annuity for $40,000. Natasha will receive $400 per month for the rest of her life. The expected return multiple is 20.0. At age 65, the amount that Natasha may exclude from income is

Question

Quizplus · Accepted Answer

The exclusion ratio is calculated as the investment in the contract ($40,000) divided by the expected return ($400/month * 12 months/year * 20 years = $96,000), which equals 0.4167. Therefore, $400 * 0.4167 = $166.68 is excluded per month. Over a year, this is $166.68 * 12 = $2,000.

Natasha, Age 58, Purchases an Annuity for $40,000