Income Beginner: Introduction to Annuities

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1.
If an annuity is designated as an individual retirement account (IRA), money invested into it may be tax deductible. This means that _______.
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Contributions are not taxed in the year contributed. Once the contract is annuitized, the entire amount of the annuity payments is then taxed.
2.
If an annuitant receives a guaranteed monthly check for life, with payments ceasing at death, which payout option has he or she selected?
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A life annuity.
3.
An annuitant is _______.
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A person on whose life an annuity is based.
4.
Fixed annuity premiums must be placed into the insurance companys _______.
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General account. Fixed annuity premiums are placed into the insurance companys general account. This money is then reinvested very conservatively.
5.
An annuity should never be used for a childs future education expenses, because the child will be less than age 59 and thus subject to the 10 percent penalty tax.
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False. If the annuitant or contract owner is a parent or grandparent who will be older than age 59 at the time the education funds are needed, then an annuity can be a viable option.
6.
Which of the following is acceptable for putting money into a flexible premium annuity?
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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.
7.
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.