Choose wisely. There is only one correct answer to each question.
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1.
You must pay taxes on investment earnings that build in your annuity account.
False. Your earnings in a deferred annuity build on a tax-deferred basis. You pay no tax on them until you receive them as a payout.
2.
An annuity that makes payments at a guaranteed level is a(n) _______.
Fixed annuity. A fixed annuity is an annuity that makes payments at a guaranteed level.
3.
A non-qualified annuity can be a good way to avoid all of the following except _______.
Early withdrawal penalties. Unlike the other choices, early withdrawal penalties can't be avoided with deferred annuities (except, of course, by not withdrawing your funds prematurely!).
4.
An annuity that delays payments until some point in the future is called a(n) _______.
Deferred annuity. A deferred annuity delays payments until some point in the future.
5.
An annuity that allows you to shelter some of your current income from taxes is called a _______.
Qualified annuity. A qualified annuity, based on the assets of a qualified retirement plan such as a 401(k) or 403(b), allows you to shelter some of your current income from taxes.