DEFINITION of 'Investment In The Contract'

As this term applies to annuities, the principal amount that the contract owner has invested in the contract. The investment in the contract can be made as a series of payments or in a single lump sum. This term generally applies to fixed, indexed and variable annuities alike.

BREAKING DOWN 'Investment In The Contract'

Any amount of money withdrawn from an annuity that is in excess of the investment in the contract is considered a taxable distribution. Investors who annuitize their contracts will see a portion of each payment they receive classified as a return of principal or investment in the contract. This portion of each payment is considered a tax-free return of principal.

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