The IRS is full of all sort of different rules and regulations which Phil Cannella strives to keep up with. One little unknown secret that Phil Cannella educates consumers on is called the exclusion ratio. This rule will allow a person to receive a tax efficient income over a period certain time frame. This rule, however, only applies to Non-Qualified funds.
The exclusion ratio utilizes your funds in a way in which the principal and interest earnings are paid out on a pro-rated basis. Normal investments operate under the rule of LIFO (last in first out) which means when a withdrawal is made the interest will come out first which is fully taxable. The exclusion ratio will only take a portion of that interest out and combine it with principal which is already after-tax funds. The result is a more efficient way to receive income by reducing taxable earnings that must be reported on a W2. This is only one of the many ways that Phil Cannella is able to help the American Retiree live a more comfortable and worry free retirement.
