Exclusion Ratio Calculator

Formula

The formula to calculate the Exclusion Ratio (ER) is:

\[ ER = \left( \frac{Investment}{Expected Return} \right) \times \left( \frac{1}{Life Expectancy} \right) \times 100\% \]

Where:

$ ER $ is the exclusion ratio (%)
$ Investment $ is the total amount invested (USD)
$ Expected Return $ is the total amount expected to be returned over the life of the investment (USD)
$ Life Expectancy $ is the expected number of years the return will be received (years)

Exclusion Ratio (ER): A percentage that represents the portion of an annuity payment that is a return of the original investment, which is not subject to income tax.
Total Investment: The total amount invested in the annuity.
Expected Return: The total amount expected to be returned over the life of the investment.
Life Expectancy: The expected number of years the return will be received.

Let's say the Total Investment is $100,000, the Expected Return is $150,000, and the Life Expectancy is 20 years. Using the formula:

\[ ER = \left( \frac{100,000}{150,000} \right) \times \left( \frac{1}{20} \right) \times 100\% \]

We get:

\[ ER \approx 0.33\% \]

So, the Exclusion Ratio is approximately 0.33%.