Life Expectancy Multiple

Life Expectancy Multiple means:
the life expectancy of a person in the form of a multiple in U.S. Internal Revenue Service (IRS) actuarial tables. The multiple times the annual payment yields the expected return.

Example of Life Expectancy Multiple:

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At age 60, Jane is expected to live 24.2 more years (IRS Publication 939, Table V). She is receiving an annuity of $1,000 per month, and her cost for the annuity contract was $12,000. The tax-free amount of each payment, until the cost is recovered, is calculated as follows:

Cost of the contract $ 12,000.

Number of expected annual payments (divide) 24.2.

Tax-free amount (cost recovery) per payment $496.