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Portfolios 401: Deferred, Fixed, and Variable Annuities

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1.
When you annuitize, you are paying into your annuity account.
Choose wisely. There is only one correct answer.
False. When you annuitize, you begin receiving income from your annuity.
2.
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.
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.
A non-qualified annuity can be a good way to avoid all of the following except _______.
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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.
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.
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.
Equity-indexed annuities typically promise what kind of return?
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A guaranteed rate of return. A guaranteed rate of return is promised, and there is usually some participation in stock market returns as well.
8.
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.