Questions and Answers
How are annuities given favorable tax treatment?
Gains are taxed at distribution
What happens to interest earned if the annuitant dies before the payout start date?
It is taxable
Which of these statements regarding the annuitant is correct?
The annuitant's life expectancy determines the annuity payments
If the annuitant dies before the annuity start date, what happens to the premiums paid plus interest earned?
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Kathy's annuity is currently experiencing tax deferred growth until she retires. Which phase is this annuity in?
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Study Notes
Annuity Tax Treatment
- Annuities benefit from favorable tax treatment as gains are taxed only upon distribution.
- This structure allows for tax-deferred growth until funds are accessed.
Treatment of Interest Earned
- If an annuitant passes away prior to the start date of payouts, the interest earned is subject to taxation.
Annuitant and Payment Determination
- The life expectancy of the annuitant plays a crucial role in determining the amount of annuity payments received.
Benefits to Beneficiaries
- Should the annuitant die before the annuity begins payouts, the beneficiary will receive the total of premiums paid plus any interest accrued.
Phases of Annuity
- While Kathy's annuity experiences tax-deferred growth before retirement, it is in the accumulation period.
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Description
Test your knowledge on annuities with these flashcards. Each card covers key concepts such as tax treatment, interest earned upon death, and payments based on life expectancy. Perfect for anyone studying finance or investment topics.
