Annuities

What is the penalty for excessive contributions to an IRA?

6%

In general terms, IRA contributions

Are tax deductible

Which of the following is NOT a legitimate use of annuities by business?

Creating a tax shelter

Which of the following is NOT an appropriate use of a deferred annuity?

Creating an estate

Which of the following are NOT fundable by annuities?

Death benefits

An agent selling variable annuities must be REGISTERED with whom?

FINRA

Which of the following is true regarding variable annuities?

The annuitant assumes the risks on investment

Which of the following is TRUE for both equity indexed annuities and fixed annuities?

They have a guaranteed minimum interest rate.

Which of the following is NOT true regarding Equity Indexed Annuities?

They earn lower interest rates than fixed annuities.

Your client plans to retire at age 50. He would like to purchase an annuity that would provide income from the time he retires to the age when social security and other pension funds become available. What settlement potion should he consider?

Annuity certain which allows the annuitant to select the time period or the amount for the benefits

If an annuitant dies before annuitization occurs, what will the beneficiary receive?

Either the amount paid into the plan or the cash value of the plan, whichever is the greatest amount

Under which installments option does the annuitant select the amount of each payment and the insurer determines how long they will pay benefits?

Fixed amount

What license or licenses are required to sell variable annuities?

Life insurance AND securities license

What is incorrect about IRA's?

Married couples are required to purchase a jointly owned IRA

Equity Indexed Annuities seek higher returns and is tied to which index?

Standard and Poor's 500

The advantage of qualified plans to employers is

Tax deductible contributions

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

Teachers and not-for-profit organizations

The annuity owner dies during the accumulation period of his annuity. The cash value of his annuity exceeds the premiums he paid. There is no named beneficiary. What is true?

The cash value will be paid to the annuitants estate.

What is true regarding a modified guaranteed annuity?

The owner is guaranteed a fixed interest rate for a specific period of time.

A deferred annuity is surrendered prior to annuitization. Which of the following best describes the nonforfeiture value of the annuity?

The surrender value should be equal to 100% of the premium paid minus any prior withdrawals and surrender charges.

What is the market value adjustment in modified guaranteed annuities?

A percentage of the difference between the contracted rate of interest in the annuity and the current rate at surrender

What is NOT true regarding a qualified annuity?

At distribution, all amounts received by the employee are tax free

If a deferred annuity is surrendered prematurely, a surrender charge is imposed. How is the surrender charge determined?

It is a percentage of the cash value and decreases over time

Which of the following is not true regarding the Life with Guaranteed Minimum annuity settlement option?

It provides a higher monthly benefit than a pure life annuity

Under a straight life annuity, if the annuitant dies before the principal amount is paid out, the beneficiary will receive..

Nothing...payments will cease

The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true?

The annuitant must be a natural person

If the owner prematurely surrenders his deferred annuity before the annuitization period begins, which of the following is most likely to occur?

The owner will receive the premium payments that have been paid into the annuity plus any interest minus a surrender charge

Which of the following is NOT considered earned income?

Unemployment benefits

A couple near retirement is planning for their golden years. They want to make sure that their retirement annuity provides monthly benefits for the rest of their lives. Should one of them die, the other would still like to continue receiving benefits. Which settlement option should they choose?

Joint and Survivor

Which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income?

Depreciation period

K purchased a $90,000 annuity with a single premium, and began receiving payments 2 months after that. What type of annuity is it?

Immediate

Your client is planning to retire. She accumulates $100,000 in a retirement annuity, and now wants to select the benefit option that will pay the largest monthly amount for as long as she lives. As her agent, you should recommend what option?

Straight life option

What would happen if a prospective DEFERRED annuity owner surrendered the annuity before the annuitization period?

Nonforfeiture option guarantees that the owner will receive a surrender value of the contract (100% of the premium paid, less any prior withdrawals and related surrender charges)

Who can make a fully deductible contribution to a traditional IRA?

An individual who has earned income

When an annuity is written, whose life expectancy is taken into account?

Annuitant

What is NOT true regarding installments for a fixed period annuity settlement option?

It is a life contingency option.

If an annuitant selects the pure or straight life annuity settlement option, in order to receive all of the money out of the contract, it would be necessary to do what?

Live at least to his/her life expectancy

Which of the following is another term for the accumulation period of the annuity?

Pay-in period

What is NOT true about equity index annuities?

The annuitant receives a fixed amount of return and they earn lower interest rates than fixed annuities

Regarding installments for a fixed amount, what is NOT true?

The payments will stop when the annuitant dies

Which of the following best describes what the annuity period is?

The period of time during which accumulated money is converted into income payments

Which of the following can surrender a deferred annuity contract?

Only the annuity owner

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.

Which of the following ULTIMATELY determines the interest rates paid to the owner of a fixed annuity?

Insurer's guaranteed minimum rate of interest

The annuity owner dies while the annuity is still in accumulation stage. Which of the following is true?

The beneficiary will receive the greater of the money paid into the annuity or the cash value

Under a pure life annuity, an income is payable by the company...

Only for the life of the annuitant

Which of the following is a feature of a variable annuity?

Benefit payment amounts are not guaranteed

A lucky individual won the state lottery, so the state will be sending him a check each month for the next 25 years. What type of annuity products are they likely to use to provide these benefits?

Immediate annuity