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.
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.
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.
An annuitant is _______.
Choose wisely. There is only one correct answer.
A person on whose life an annuity is based.
4.
Under what type of payout arrangement can an annuitant arrange for a certain dollar amount to be periodically liquidated from the annuity and sent to him or her?
Choose wisely. There is only one correct answer.
Systematic withdrawals. With this option, a certain amount is sent to the annuitant every month, quarter, or year.
5.
Once the money is annuitized from an annuity that had received nondeductible premiums, _______.
Choose wisely. There is only one correct answer.
A portion of each payment is taxed according to an IRS formula.
6.
An annuity should be used only for retirement planning.
Choose wisely. There is only one correct answer.
False. An annuity can be an ideal investment vehicle for such important goals as a grandchilds education expenses and paying for hospital and medical costs associated with an accident or lengthy illness during ones older years.
7.
With a flexible premium annuity, an annuitant should never miss a premium payment, as this will likely void his or her contract.
Choose wisely. There is only one correct answer.
False. With a flexible premium annuity, generally, a scheduled payment can be missed without fear of losing any of the preceding payments into the plan.