Income Beginner: Introduction to Annuities

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1.
Once the money is annuitized from an annuity that had received nondeductible premiums, _______.
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A portion of each payment is taxed according to an IRS formula.
2.
A fixed annuity offers a guarantee of the safety of principal, but not a guaranteed rate of return.
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False. A fixed annuity offers the investor a guarantee of the safety of his or her principal as well as a guaranteed rate of return on all funds placed in the insurance companys general account.
3.
If an annuitant does not wish to annuitize the funds, he or she can simply surrender the full value of the annuity.
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True. If the annuitant does not wish to annuitize, he or she can simply surrender the full value of the annuity.
4.
Most insurance companies allow loans from an annuity.
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False. Because loans are classified as taxable withdrawals, most insurance companies do not permit loans from annuities.
5.
An annuitant is _______.
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A person on whose life an annuity is based.
6.
With a flexible premium annuity, an annuitant should never miss a premium payment, as this will likely void his or her contract.
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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.
7.
If an annuitant will receive payments for life, but at least for 10 years, which payout option has he or she selected?
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A life annuity with period certain. The annuitant receives payments for life, with a certain period of time guaranteed. If the annuitant dies before expiration of the period certain, payments continue to the named beneficiary for the remainder of the period.