Life Insurance - Chapter 7: Annuities

These are true about annuitant

-Must be a natural person -Annuitant's life expectancy is taken into consideration for the annuity -The annuitant receives annuity benefits -Annuitant can by the same person as the annuity owner

What is the penalty for excessive contributions to an IRA?

6%

What is true about the accumulation period of an annuity

It is a period during which the payments (premiums) into the annuity earns interest and grow tax deferred

Which is not true regarding the life with guaranteed minimum annuity settlement option? a. it is a life contingency option b. the beneficiary receives the reminder of the principal amount upon the annuitant's death c. payments can be made in installments and as a single cash refund d. it does not guarantee that the entire principal amount will be paid out

D

A tax-sheltered annuity is a special tax-favored retirement plan available to

Certain groups of employees only. E.g. Non-profit, education, religious, 501c(3) organizations

The annuity owner dies during the accumulation period without naming a beneficiary. Annuity's cash value exceeds premiums paid. Which is true?

The cash value will be paid to the annuitant's estate

In general terms, IRA contributions are

Tax deductible

How are contributions to a tax-sheltered annuity treated with regards to taxation?

They are not included as income for the employee, but are taxable upon distribution

As it pertains to IRA eligibility, which of the following would not be considered earned income

Unemployment benefits

Which of the following is NOT fundable by annuitites? a. estate liquidation b. death benefits c. cash accumulation for any reason d. a person's retirement

B. Annuities do not provide death benefits; that's provided by life insurance

Which of the following will NOT be an appropriate use of a deferred annuity? A. Funding a child's college tuition B. Creating an estate C. Accumulating retirement funds D. Accumulating funds in an IRA

B. Unlike life insurance, annuities do not create estate, but liquidate it.

Who is eligible to purchase an IRA

Anyone who has earned income

If a contract provides a set amount of income for two or more persons with the income stopping upon the first death of the insured, it is called a

Joint life annuity

Which of the following statements is incorrect regarding IRAs? a. Married couples are required to purchase a jointly owned IRA b. A nonworking spouse is eligible to contribute to a separate IRA account c. Anyone with earned income may open a traditional IRA d. Accumulated contributions grow tax deferred

A

All of the following are true in regards to installments for a fixed amount except a. this option pays a specific amount until the funds are exhausted b. the annuitant may select hot big the payments will be c. the payments will stop when the annuitant dies d. value of the account and future earnings will determine the time period for the benefits

C

A 403(b) plan, commonly referred to as a TSA, is available to be used by

Teachers and not-for-profit organizations