Glossary

The exclusion ratio is the portion of each non-qualified annuity payment that represents return of the contract owner's after-tax cost basis and is therefore excluded from federal income taxation. Why it matters The exclusion ratio determines how much of each annuity payment the contract owner receives free of federal income tax, with the remainder taxed as ordinary income. The mechanism applies only to non-qualified annuities (those purchased with after-tax dollars); qualified an

Fee-based is a compensation model in which a financial professional is paid through ongoing fees — typically a percentage of assets under management or a flat retainer — rather than through commissions on individual product placements, distinguished from fee-only by the fact that fee-based professionals may also accept commissions on certain transactions. Why it matters The fee-based label describes a compensation structure that is structurally distinct from both pure commission c