Podcast
Questions and Answers
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?
What type of annuity provides a guaranteed accumulation or payout?
What type of annuity provides a guaranteed accumulation or payout?
Annuity certain
An annuity is primarily used to provide?
An annuity is primarily used to provide?
What is the primary reason for buying an annuity?
What is the primary reason for buying an annuity?
Signup and view all the answers
The taxable portion of each annuity payment is calculated using which method?
The taxable portion of each annuity payment is calculated using which method?
Signup and view all the answers
If the annuitant dies before the annuity start date?
If the annuitant dies before the annuity start date?
Signup and view all the answers
Which of these statements regarding the annuitant is CORRECT?
Which of these statements regarding the annuitant is CORRECT?
Signup and view all the answers
Kristi purchases an annuity that will pay her husband an income for 15 years. If he dies, this income will become payable to their children for the remainder of the period. What kind of annuity does Kristi have?
Kristi purchases an annuity that will pay her husband an income for 15 years. If he dies, this income will become payable to their children for the remainder of the period. What kind of annuity does Kristi have?
Signup and view all the answers
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?
Signup and view all the answers
Andy the annuitant dies before the annuity start date. Which of the following is a TRUE statement?
Andy the annuitant dies before the annuity start date. Which of the following is a TRUE statement?
Signup and view all the answers
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?
Signup and view all the answers
Which annuity payout option allows the policyowner to choose a pre-determined number of benefit payments?
Which annuity payout option allows the policyowner to choose a pre-determined number of benefit payments?
Signup and view all the answers
When does an immediate annuity begin making payments?
When does an immediate annuity begin making payments?
Signup and view all the answers
What will the beneficiary receive if an annuitant dies during the accumulation period?
What will the beneficiary receive if an annuitant dies during the accumulation period?
Signup and view all the answers
Simon has purchased a fixed immediate annuity. His payment amount will be dependent upon principal, interest, and the contract's?
Simon has purchased a fixed immediate annuity. His payment amount will be dependent upon principal, interest, and the contract's?
Signup and view all the answers
Study Notes
Annuity Phases and Types
- Annuities have distinct phases: the accumulation period allows tax-deferred growth until retirement.
- Annuity certain guarantees a fixed accumulation or payout, providing assurance to the holder.
Purpose of Annuities
- Annuities primarily serve to provide retirement income, ensuring financial security in later years.
- The main reason for obtaining an annuity is to achieve future economic security.
Taxation of Annuities
- The taxable portion of annuity payments is determined by the exclusion ratio, which divides the non-taxable return of investment from taxable gains.
- If the annuitant dies before the payout phase, beneficiaries receive premiums paid plus interest earned, and this amount is taxable.
Beneficiaries and Payout Options
- The annuitant’s life expectancy significantly influences annuity payments, distinguishing the financial outcomes.
- Different payout structures exist, such as a temporary annuity certain, which pays beneficiaries for a specified duration, ensuring continued support.
Death and Tax Implications
- If an annuitant passes away prior to the payout commencement, the beneficiary is entitled to the greater of the accumulated cash value or total premiums paid.
- In cases where annuitants die before the start date, the premiums paid plus interest are returned to the beneficiary, maintaining the value accrued.
Immediate Annuities and Payment Plans
- An immediate annuity starts making payments right after the first premium is paid, facilitating rapid access to funds.
- The period certain payout option enables policyholders to select a fixed number of payments, ensuring structured financial planning.
Fixed Immediate Annuities
- For fixed immediate annuities, the payment amount relies on principal, interest, and established income period, ensuring predictability in income.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Test your knowledge of annuities with these flashcards from XCEL Chapter 9. Each card presents a question related to different phases and types of annuities, helping you solidify your understanding of this crucial financial concept.
