Income Intermediate: Fixed Annuities

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1.
A fixed annuity is a good hedge against inflation.
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False. Fixed-income payments and relatively low returns mean that annuities provide little protection against inflation.
2.
The earnings on fixed annuities are free from taxes until you annuitize.
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True. Annuity income is tax-deferred.
3.
The period during which annuity premiums are paid is called the _______.
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Accumulation period. In the accumulation period, the annuity owner (annuity holder) pays premiums to the company.
4.
The better your investment choices pay off, the more your fixed annuity will pay.
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False. Fixed annuities earn a fixed income rate and pay a fixed income, regardless of the performance of the underlying investments. You do not make investment choices in a fixed annuitypremiums go into the general account of the company.
5.
What is taxed during the accumulation period of a non-qualified annuity?
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Annuity contributions. The income you contribute to a non-qualified annuity is subject to taxation during the accumulation period. A non-qualified annuity is one that is outside of a retirement plan.