Income Beginner: Introduction to Annuities

Test your knowledge

Choose wisely. There is only one correct answer to each question.

0%
Keep studying!
Review your answers below to learn more.
1.
Which of the following is acceptable for putting money into a flexible premium annuity?
Choose wisely. There is only one correct answer.
All of the above. With a flexible premium annuity, an investor can make a single premium payment, periodic payments, or sporadic payments according to no particular schedule.
2.
Fixed annuity premiums must be placed into the insurance companys _______.
Choose wisely. There is only one correct answer.
General account. Fixed annuity premiums are placed into the insurance companys general account. This money is then reinvested very conservatively.
3.
Annuities can provide tax deferral after annuitization.
Choose wisely. There is only one correct answer.
True. Only the annuity payments are taxable, not the account value.
4.
Most annuities have a surrender charge schedule built into them that penalizes early withdrawals.
Choose wisely. There is only one correct answer.
True. Most annuities have a surrender charge schedule built into them that penalizesand therefore discouragesearly withdrawals (except permitted limited withdrawals). A typical surrender charge might start at 10 percent and decline to 0 percent over a 10- or 15-year period.
5.
Most insurance companies allow loans from an annuity.
Choose wisely. There is only one correct answer.
False. Because loans are classified as taxable withdrawals, most insurance companies do not permit loans from annuities.
6.
At any time after commencement of lifetime annuity payments, the annuitant may request a surrender to receive a lump sum cash payment.
Choose wisely. There is only one correct answer.
False. To receive lifetime annuity payments, the annuitant must surrender the annuity cash value to the insurance company.
7.
If an annuitant receives a guaranteed monthly check for life, with payments ceasing at death, which payout option has he or she selected?
Choose wisely. There is only one correct answer.
A life annuity.