Income Intermediate: Fixed Annuities

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1.
A fixed annuity is a good hedge against inflation.
Choose wisely. There is only one correct answer.
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 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.
4.
When you annuitize, you are paying into your annuity account.
Choose wisely. There is only one correct answer.
False. When you annuitize, you begin receiving income from your annuity.
5.
Since you may die before you collect the full value of your annuity through the life annuity option, it is better to select an option with a period certain provision.
Choose wisely. There is only one correct answer.
False. Though this could be true, it really depends upon one's objectives. Each option has benefits and tradeoffs.