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1.
The period during which annuity premiums are paid is called the _______.
Accumulation period. In the accumulation period, the annuity owner (annuity holder) pays premiums to the company.
2.
An annuity that allows you to shelter some of your current income from taxes is called a _______.
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.
3.
Which of the following is not a characteristic investment account available with variable annuities?
General account. Stock, bond, and money market accounts are the "characteristic" separate accounts available with variable annuities.
4.
A non-qualified annuity can be a good way to avoid all of the following except _______.
Early withdrawal penalties. Unlike the other choices, early withdrawal penalties can't be avoided with deferred annuities (except, of course, by not withdrawing your funds prematurely!).
5.
A fixed annuity is a good hedge against inflation.
False. Fixed-income payments and relatively low returns mean that annuities provide little protection against inflation.
6.
How do equity-indexed annuities let you share in equity market returns?
They offer a percentage of the return of a stock market index. This is an extra perk of these annuities.
7.
With annuities, mortality risk benefits _______.
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.
8.
The earnings on fixed annuities are free from taxes until you annuitize.
