9 - Annuities

A teacher recently retired at age 63 and has a tax-sheltered annuity (TSA). Periodic deposits of $120,000 and the value of the contract is now worth $200,000. How much is taxed if the current value is surrendered today? $200,000 $120,000 $80,000 $0

$200,000

When an annuity contract has been fully surrendered, how will the surrender charges affect the final contract settlement? Final contract settlement will be reduced Final contract settlement will be increased Final contract settlement will not be affected Final contract settlement will be held in escrow

Final contract settlement will be reduced

John bought a deferred annuity on Mary. John amends the contract years later to name Tom as the recipient of the proceeds if Mary dies. Who is the annuitant for this contract? John Mary Tom Mary's estate

Mary

Which of the following would NOT be appropriate for an immediate annuity? a lottery winner who opted for a lump-sum payment a parent saving for college a beneficiary collecting the face amount of a life insurance policy someone who just won a large settlement

a parent saving for college

An annuity's accumulation period may continue after the purchase payments stop continue after the benefit payments start continue after the annuitant dies continue after the annuity has been surrendered

continue after the purchase payments stop

The main purpose of annuity is to provide a tax shelter create an estate create a stream of income provide a death benefit

create a stream of income

When a sum of money undergoes capital liquidation, that sum will increase in value remain the same decrease in size create tax deductions

decrease in size

An individual age 45, would like to help pay for his daughter's college expenses in 10 years. Which annuity would be appropriate for this individual? joint and survivor annuity deferred annuity 403(b) plan immediate annuity

deferred annuity

When determining the accumulation value of a deferred annuity, the total is calculated by taking the premiums paid plus interest earned minus bailout option charge surrender charges taxes owed expenses and withdrawals

expenses and withdrawals

An annuitant is paid $495 per month until the contract value is exhausted at some undetermined date in the future. Which type of annuity payout option is this? fixed amount straight life period certain installment refund

fixed amount

Who typically makes the purchase payments in an individual annuity? owner trustee insurer beneficiary

owner

What determines how much an annuitant is paid for a variable annuity? varies according to how many outstanding annuity units payments fluctuate as annuitant gets older the market value variations of the securities backing it varies according to the insurer's investments in its general account

the market value variations of the securities backing it

Which statement concerning a deferred annuity contract is true? the contract cannot be assignable by the owner requires a single premium payment the owner can be the beneficiary, annuitant, or neither benefits start immediately after the contract formation

the owner can be the beneficiary, annuitant, or neither

When does the owner's contractual rights begin under an individual annuity contract? time of purchase when the benefit period begins when the accumulation period ends after free-look period expires

time of purchase

Tori has an annuity that pays her $500 per month income benefit for life or for 10 years, whichever is longer. What kind of annuity is this? fixed life annuity with period certain variable life annuity with installment refund fixed life annuity with cash refund variable life annuity with period certain

fixed life annuity with period certain

Which of the following contracts offer deferred taxation, flexible payments, a guaranteed interest rate, and death benefits equal to the cash value? variable life policy modified life policy flexible premium fixed annuity immediate fixed annuity

flexible premium fixed annuity

A large corporation pension plan purchased an accumulation annuity contract where all of the participating employees received certificates of participation. What is this contract called? 403(b) plan group deferred annuity group immediate annuity joint and survivor group plan

group deferred annuity

A life annuity with period certain is characterized as guaranteeing benefit payments for a stated period of time after reaching the age of 65 guaranteeing a minimum interest rate guaranteeing lifetime benefit payments for two or more people guaranteeing benefit payments for a stated minimum number of years

guaranteeing benefit payments for a stated minimum number of years

Which of the following is associated with an IMMEDIATE annuity? tax-free benefit payments installment premium payments lack of an accumulation period Lump-sum benefit

lack of an accumulation period

Which benefit can be found in an equity indexed annuity, but not in a fixed annuity? protection against living too long equity loans a fixed rate of return protection against long-term inflation

protection against long-term inflation

An annuity's accumulation period may continue after the purchase payments stop benefit payments start annuitant dies annuity has been surrendered

purchase payments stop

Which of the following would most likely purchase an immediate annuity? individual wishing to contribute to a tax-sheltered annuity individual wanting to accumulate an investment over time retiree having a lump sum to invest business needing an immediate tax write-off

retiree having a lump sum to invest

What does a fixed life annuity offer protection against? inflation premature death inadequate retirement planning savings depletion due to longevity

savings depletion due to longevity

An insurer will typically assess a back-end load on a deferred annuity that is cancelled during the early contract years. What is this back-end load referred to as? back-end assessment cancellation fee surrender charge tax penalty

surrender charge

The interest paid during an annuity's payout period is considered nontaxable taxable as ordinary income taxable sa capital gains tax-deductible

taxable as ordinary income

How are monthly life annual benefit payments treated under a tax sheltered annuity (TSA)? taxed as a capital gain during the accumulation period taxed as ordinary income during the accumulation period taxed as ordinary income in the year received received tax-free to all recipients

taxed as ordinary income in the year received

The owner's cost basis for a non-qualified deferred annuity is typically the same as the annuity's cash value total premiums paid benefits payable to the annuitant interest earned within the annuity

total premiums paid

When does interest income for a flexible premium deferred annuity get reported for federal income taxes? never after the principal has been exhausted upon receiving distributions form the contract during the accumulation phase

upon receiving distributions form the contract