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1.
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.
2.
Equity-indexed annuities typically _______ some safeguards if the stock market dives.
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.
An annuity's exclusion ratio keeps your contributions from being taxed twice.
True. The exclusion ratio determines what part of your annual payments is made up of earnings (which are taxed) and what part is your basis (the money you contributed to your annuity, which was already taxed).
4.
The earnings on variable annuities are taxed during the accumulation period.
False. The earnings on variable annuities are tax-deferred until payout.
5.
You must pay taxes on investment earnings that build in your annuity account.
False. Your earnings in a deferred annuity build on a tax-deferred basis. You pay no tax on them until you receive them as a payout.
6.
The earnings on fixed annuities are free from taxes until you annuitize.
True. Annuity income is tax-deferred.
7.
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.
8.
When you annuitize, you are paying into your annuity account.
False. When you annuitize, you begin receiving income from your annuity.
