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.
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.
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 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.
4.
The key feature of any annuity is that it can provide income for life.
Choose wisely. There is only one correct answer.
True. The annuitant can have his or her payments from a fixed annuity paid out over his or her lifetime at a fixed dollar amount. In exchange for this privilege, he or she must first surrender the value of the annuity to the insurance company.
5.
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.
6.
There are no tax consequences associated with surrendering an annuity.
Choose wisely. There is only one correct answer.
False. Federal and state income taxes on all earnings will be due and payable in full in the year of the surrender, in addition to a 10 percent penalty tax if surrendered before age 59.
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.