After-tax value of annuities
DOI:
https://doi.org/10.61190/fsr.v17i3.4916Keywords:
Tax-deferred accounts, Tax-efficient asset allocation, After-tax value, AnnuitiesAbstract
This paper adds to the growing literature on after-tax asset valuation and asset allocation by developing a model to value annuities on an after-tax basis. Qualified and non-qualified annuities are shown to be equivalent to a tax-deferred account (like a traditional IRA) plus a cost basis tax shield, if any. Viewed in this light, the after-tax value of an annuity decreases as the investment horizon increases, but is independent of the risk of the underlying investment.
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