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Portfolios 401: Deferred, Fixed, and Variable Annuities

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1.
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.
2.
The period during which annuity premiums are paid is called the _______.
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Accumulation period. In the accumulation period, the annuity owner (annuity holder) pays premiums to the company.
3.
You must pay taxes on investment earnings that build in your annuity account.
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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.
4.
What is taxed during the accumulation period of a non-qualified annuity?
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Annuity contributions. The income you contribute to a non-qualified annuity is subject to taxation during the accumulation period. A non-qualified annuity is one that is outside of a retirement plan.
5.
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.
6.
The earnings on fixed annuities are free from taxes until you annuitize.
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True. Annuity income is tax-deferred.
7.
The earnings on variable annuities are taxed during the accumulation period.
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False. The earnings on variable annuities are tax-deferred until payout.
8.
Which of the following is not a characteristic investment account available with variable annuities?
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General account. Stock, bond, and money market accounts are the "characteristic" separate accounts available with variable annuities.