Questions and Answers
Annuities can be used to fund which of the following?
If an annuitant dies before annuitization occurs, what will the beneficiary receive?
either the amount paid into the plan or the cash value of the plan, whichever is the greater amount
The annuity owner must be the party to receive the benefits.
False
The form of life annuity which pays benefits throughout the lifetime of the annuitant and guarantees payment for a minimum number of years is called?
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What is the main difference between immediate and deferred annuities?
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What happens if a deferred annuity is surrendered before the annuitization period?
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The accumulation period of an annuity is when payments grow tax-deferred.
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The accumulation period occurs in a deferred annuity.
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If a married couple's retirement annuity pays them $250 per month and after the husband's death the wife receives $125.50, what settlement option did they select?
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What is the annuity period?
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The annuitant of an annuity can be a corporation.
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In a fixed annuity, the guaranteed interest rate is based on either the guaranteed minimum rate or the current rate, whichever is lower.
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Which product requires a securities license?
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The annuity period may last for the lifetime of the annuitant.
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Installments for a fixed period annuity settlement option is a life contingency option.
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Study Notes
Annuities Overview
- Annuities are commonly utilized to fund retirement plans, providing a steady income stream during retirement.
- If an annuitant passes away before annuitization, the beneficiary receives the greater amount between contributions made or the plan's cash value.
Annuity Ownership and Benefits
- The owner of an annuity holds all contractual rights, including naming beneficiaries and surrendering the annuity, though they do not have to be the recipient of benefits.
- The "life income with period certain" form guarantees benefits for the annuitant's lifetime with a minimum payout period.
Types of Annuities
- Immediate annuities begin income payments promptly, while deferred annuities start payments at a later date.
- Annuity surrender before the annuitization period results in the owner receiving the surrender value based on the nonforfeiture provision.
Accumulation and Income Periods
- The accumulation period of an annuity is when contributions grow tax-deferred through interest earnings.
- The annuity period is when accumulated funds are transformed into income payments, potentially lasting for the annuitant’s lifetime.
Settlement Options
- Joint and survivor settlement options enable continued payments to a surviving spouse, typically at a reduced rate, after the first death.
- Fixed annuities offer guaranteed interest rates; the annuitant receives the higher of the guaranteed rate or the current market rate.
Licensing and Regulatory Notes
- Variable annuities require a securities license for sale, differentiating them from fixed annuities and other types.
Key Characteristics
- Annuity owners can be individuals or entities, but the annuitant must always be a natural person to consider life expectancy for the contract.
- Installment payments from a fixed period annuity are not life-contingent, distinguishing them from other annuity payout options.
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Description
This quiz features key concepts and definitions related to annuities. Based on flashcards, it covers important aspects, including funding retirement plans and beneficiary rights. Test your knowledge on how annuities work and their implications for retirement income.
