Annuities

Who would be eligible to contribute to an IRA?

A 50 year old school teacher

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

Benefit payment amounts are not guaranteed

Which of the following are NOT fundable by annuities

Death benefits

Which of the following is TRUE regarding the annuity period?

It may last for the lifetime of the annuitant

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

The form of life annuity which pays benefits throughout the lifetime of the annuitant and also guarantees payment for a minimum number of years is called

Life income with period certain

Which of the following types of annuities will generally provide the highest monthly income?

Straight life

Who bears all of the investment risk in a fixed annuity?

The insurance company

What license or licenses are required to sell variable annuities?

Both a life insurance license and a securities license

Equity indexed annuities

Seek higher returns

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

The annuitant must be a natural person

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

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

When a fixed annuity owner pays a monthly annuity premium to the insurance company, where is this money placed?

The insurance company's general account

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

They earn lower interest rates than fixed annuities

The main difference between immediate and deferred annuities is

When the income payment begins

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

Annuitant

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

If the annuitant dies during the accumulation period, who will receive the annuity benefits?

The beneficiary

An annuity owner is funding an annuity that will supplement her retirement. Because she does not know what effect inflation may have on her retirement dollars, she would like a return that will equal the performance of the Standard and Poor's 500 Index. She would likely purchase a(n)

Equity Indexed Annuity

Which of the following is TRUE regarding the accumulation period of an annuity?

It is a period during which the payments into the annuity grow tax deferred

Which of the following in NOT true regarding the accumulation period of an annuity?

It would not occur in a deferred annuity

What form of the annuity settlement options provides payments to an annuitant for the rest of the annuitant's life and ceases at the annuitant's death?

Pure life

Which two terms are associated directly with the way an annuity is funded?

Single payment or periodic payments

The annuity owner dies while the annuity is still in the 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

All of the following are true of an annuity owner EXCEPT

The owner must be the party to receive benefits

What happens if a deferred annuity is surrendered before the annuitization period?

The owner will receive the surrender value of the annuity

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

Unemployment benefits

In an annuity, the accumulated money is converted into a stream of income during which time period?

Annuitization period

The advantage of qualified plans to employers is

Tax-deductible contributions

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 statements is INCORRECT regarding IRAs?

Married couples are required to purchase a jointly owned IRA

Which of the following statements is INCORRECT concerning an IRA?

Married individuals must contribute into one account for both spouses, up to a specified amount for each person

What is the penalty for excessive contributions to an IRA?

6%

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

Immediate

Under which of the following annuity options does the annuitant select the time period for the benefits, and the insurer determines how much each payment will be?

Installments for a fixed period

A married couple's retirement annuity pays them $250 per month. The husband dies and his wife continues to receive $125.50 per month for as long as she lives. When the wife dies, payment stops. What settlement option did they select?

Joint and Survivor

In general terms, IRA contributions

are tax deductible

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

Insured's guaranteed minimum rate of interest

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

Pay-in period

After three years of making payments into a flexible premium deferred annuity, the owner decides to surrender the annuity. The insurer returns all the premium payments to the owner, except for a predetermined percentage. What is this percentage called?

Surrender charge

Which of the following is NOT true regarding the annuitant?

The annuitant cannot be the same person as the annuity owner

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

Certain groups of employees only

All of the following statements are true of a nonqualified retirement plan EXCEPT

Contributions are tax exempt

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

Creating a tax shelter

Why is an equity indexed annuity considered to be a fixed annuity?

It has a guaranteed minimum interest rate

An Internal Revenue Code provision that specifically provides for an individual retirement plan for public school teachers is a(n)

403(b) Plan (TSA)

The minimum interest rates on an equity indexed annuity is often based on

An index like Standard & Poor's 500

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

An individual who has earned income

An individual has been making periodic premium payments on an annuity. The annuity income payments are scheduled to begin after 1 year since the annuity was purchased. What type of annuity is it?

Deferred

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

Depreciation period

What qualifies an individual to contribute to an IRA?

Earned income

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 greater amount

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 will NOT be an appropriate use of a deferred annuity?

Creating an estate

An individual works for a manufacturing company. If he decides to fund a retirement plan for himself, for which of the following plans could he qualify?

Individual Retirement Account

In a fixed annuity, which of the following is true regarding the guaranteed interest rate on the investment?

The annuitant will receive the higher of either the guaranteed minimum rate or current rate

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

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