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Questions and Answers
During the accumulation period, who can surrender an annuity?
During the accumulation period, who can surrender an annuity?
The Policy Owner
The taxable portion of each annuity payment is calculated using which method?
The taxable portion of each annuity payment is calculated using which method?
Exclusion Ratio
What happens to interest earned if the annuitant dies before the payout start date?
What happens to interest earned if the annuitant dies before the payout start date?
It is taxable
When does an immediate annuity begin making payments?
When does an immediate annuity begin making payments?
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Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?
Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?
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Which type of annuity stops all payments upon the death of the annuitant?
Which type of annuity stops all payments upon the death of the annuitant?
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How do interest earnings accumulate in a deferred annuity?
How do interest earnings accumulate in a deferred annuity?
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Which of the following annuity payout options makes no additional payments regardless of when the annuitant dies?
Which of the following annuity payout options makes no additional payments regardless of when the annuitant dies?
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An annuity is primarily used to provide?
An annuity is primarily used to provide?
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Which of the following is an annuity that is linked to a market-related index?
Which of the following is an annuity that is linked to a market-related index?
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Which type of annuity guarantees a stated number of income payments, whether or not the annuitant is still alive to receive them?
Which type of annuity guarantees a stated number of income payments, whether or not the annuitant is still alive to receive them?
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Which market index is normally associated with an indexed annuity's rate of return?
Which market index is normally associated with an indexed annuity's rate of return?
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Which of these will have the highest monthly payout upon annuitization?
Which of these will have the highest monthly payout upon annuitization?
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If the annuitant dies before the annuity start date, what happens to the premiums paid and interest earned?
If the annuitant dies before the annuity start date, what happens to the premiums paid and interest earned?
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Which of the following is considered to be the period when the accumulated value in an annuity is paid out?
Which of the following is considered to be the period when the accumulated value in an annuity is paid out?
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Who assumes the investment risk with a fixed annuity contract?
Who assumes the investment risk with a fixed annuity contract?
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Which of these annuities require premium payments that vary from year to year?
Which of these annuities require premium payments that vary from year to year?
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Under a non-qualified annuity, when is interest taxed?
Under a non-qualified annuity, when is interest taxed?
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How soon can the benefit payments begin with a deferred annuity?
How soon can the benefit payments begin with a deferred annuity?
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Which of these is considered to be a disadvantage of owning a fixed annuity?
Which of these is considered to be a disadvantage of owning a fixed annuity?
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An immediate annuity has been purchased with a single premium. When does the annuitant typically begin receiving benefit payments?
An immediate annuity has been purchased with a single premium. When does the annuitant typically begin receiving benefit payments?
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Fixed period settlement options are considered to be a form of a(n) ________.
Fixed period settlement options are considered to be a form of a(n) ________.
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An annuitant dies during the distribution period. What kind of annuity will return to a beneficiary the difference between the annuity value and the income payments already made?
An annuitant dies during the distribution period. What kind of annuity will return to a beneficiary the difference between the annuity value and the income payments already made?
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Kathy's annuity is currently experiencing tax-deferred growth until she retires. Which phase is this annuity in?
Kathy's annuity is currently experiencing tax-deferred growth until she retires. Which phase is this annuity in?
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Study Notes
Annuities Overview
- The policy owner can surrender an annuity during the accumulation period.
- Annuity payments' taxable portions are determined using the exclusion ratio.
- If the annuitant dies prior to the payout start date, the interest earned becomes taxable.
Payment Structures
- Immediate annuities start making payments immediately after the first premium is paid.
- Life income settlement options provide payments to the annuitant with no residual value for beneficiaries.
- A life annuity ceases payments upon the annuitant's death, while life only options do not make extra payments regardless of the annuitant's death timing.
Financial Purposes
- Annuities are primarily utilized for retirement income generation.
- Equity-indexed annuities are linked to market-related indices such as the S&P 500.
Payout Guarantees
- Life annuities certain guarantee a set amount of income payments regardless of the annuitant's survival.
- The straight life option typically offers the highest monthly payout upon annuitization.
Death Benefits
- If the annuitant dies before the annuity's start date, beneficiaries receive premiums paid along with the interest earned.
Phases of Annuity
- The annuitization phase is when the accumulated annuity value is paid out.
- Investment risk in fixed annuity contracts is borne by the insurer.
Premium Variability
- Flexible premium deferred annuities require variable premium payments annually.
- Benefit payments from deferred annuities can begin as early as 12 months post-purchase.
Taxation Implications
- Under non-qualified annuities, interest taxation occurs once the exclusion ratio has been applied.
- Fixed annuities can diminish in purchasing power during inflationary periods.
Immediate Annuities
- With a single premium investment in an immediate annuity, benefit payments typically commence within one month.
Related Concepts
- Fixed period settlement options are classified as a type of annuity.
- Refund annuities return the difference between the annuity's value and the total income already disbursed to a beneficiary if the annuitant dies during the distribution phase.
- Annuity growth remains tax-deferred until retirement during the accumulation period.
Studying That Suits You
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Description
Test your knowledge about annuities with this set of flashcards. Each card covers key concepts, such as the accumulation period, taxation methods, and payment timelines for annuities. Perfect for students and professionals preparing for financial certifications.
