"after tax" monies used to purchase annuity income have something qualified
plans do not. The Exclusion Ratio or amount of the annuity payment that is not subject to income tax since it is considered to be a
return of not only interest but of original principal "cost basis". The cost basis is the
original investment and is not subject to income tax when distributed from a
Personal Income Annuity.
The exclusion ratio is determined by the amounts of principal and interest
being returned. An account with a large amount of credited interest will
have a lower exclusion ratio than a mostly principal payout.
For example, if a
60 year old male with $100,000 and a cost basis of $50,000 purchases an annuity
income for life the payment would be $594 per month of which 29% would be tax
If that same 60 year old had a cost basis of $100,000 the payment is still
$594 per month however, the exclusion ratio would be 58%.