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There are three primary types of retirement annuities: fixed, variable and indexed. A fixed annuity provides a fixed amount of return, or income, over a specific number of years or over your lifetime.
You can purchase an annuity with a single lump-sum of money, called the premium or through flexible premium payments over time. In return, youll receive a check (or direct deposit) on a monthly, quarterly, semiannual, or annual basis for the rest of your life.
The taxable portion of your variable annuity is calculated in the same manner as a fixed income annuity, by multiplying the number of total monthly payments by the dollar amount of each monthly payment, then dividing that figure by your initial lump-sum premium.
The amount of each payment that is more than the part that represents your net cost is taxable. Under the General Rule, the part of each annuity payment that represents your net cost is in the same proportion that your investment in the contract is to your expected return.
To calculate the taxable income from a non-qualified annuity, determine the cost basis, divide it by the accumulation value to get the exclusion ratio, and then subtract the exclusions. Besides offering lifetime income, annuities also offer a way to earn interest and grow your retirement savings.
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Any payment received by way of commutations of pension out of the Jeevan Suraksha Jeevan Nidhi Annuity plans is exempt from tax. Any sum received under section 80DD (3), where the dependent, being a person with disability, predeceases the individual or the member of the HUF.
This rule is called the annuity aggregation rule, or aggregation tax rule. It says that if you buy more than one deferred annuity of any kind from the same insurance company within the same year, your withdrawals will be aggregated for the purpose of calculating the tax that you owe.
Your FERS Annuity is, in short, the pension you receive from the Federal Employee Retirement System. After you retire, youll receive monthly annuity payments from the government for the rest of your life.

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