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Portfolios 401: Deferred, Fixed, and Variable Annuities

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1.
The period during which you receive payments from an annuity contract is called the _______.
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Payout period. In the payout period you surrender the value of the annuity contract in exchange for guaranteed monthly payments of benefits.
2.
Equity-indexed annuities typically _______ some safeguards if the stock market dives.
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Do provide. These annuities allow you not only to share when the market goes up, but they usually limit your losses when the market goes down.
3.
Unlike with fixed annuities, your payments from a variable annuity are not guaranteed.
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True. They depend in part on the performance of the underlying investments in the separate accounts to which you contribute.
4.
All of the following are benefits of deferred annuities except _______.
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Easy access to capital. Easy access to capital is not a benefit of deferred annuities, where surrender fees and tax penalties can affect early withdrawals.
5.
Since you may die before you collect the full value of your annuity through the life annuity option, it is better to select an option with a period certain provision.
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False. Though this could be true, it really depends upon one's objectives. Each option has benefits and tradeoffs.
6.
With annuities, mortality risk benefits _______.
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Both. Annuitants trade the risk of dying before collecting full value for higher payments and possibly collecting more than full value if they live long.
7.
Your monthly income from a fixed annuity is based on _______.
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Your age and your sex. Your age and sex are two factors that determine the monthly payment you receive from an annuity. "The value of your investments" indicates a variable annuity.
8.
An annuity that allows you to shelter some of your current income from taxes is called a _______.
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Qualified annuity. A qualified annuity, based on the assets of a qualified retirement plan such as a 401(k) or 403(b), allows you to shelter some of your current income from taxes.