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1.
How do equity-indexed annuities let you share in equity market returns?
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They offer a percentage of the return of a stock market index. This is an extra perk of these annuities.
2.
A fixed annuity is a good hedge against inflation.
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False. Fixed-income payments and relatively low returns mean that annuities provide little protection against inflation.
3.
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.
4.
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.
5.
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!).
6.
When you annuitize, you are paying into your annuity account.
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False. When you annuitize, you begin receiving income from your annuity.
7.
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.
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.