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My Annuities

QuestionAnswer
For a single premium deferred annuity, the ___________________ is the time between the purchase date and the date when benefits begin. accumulation phase
What is not a right and/or responsibility of the annuitant? The annuitant pays the premiums The annuitant chooses the beneficiary Both of the above Neither of the above both In most cases the annuitant is also the contract owner. The contract owner pays premiums and chooses the beneficiary. In the event that the annuitant is not the contract owner, he/she would not pay premiums nor would he/she select the beneficiary.
Insurance companies use 5 major factors to determine annuity premiums. What are the 5 major factors? the annuitant's age and sex, the assumed interest rate, the periodic income amount and payment guarantees, and also, company expenses (or load)
what is not a true statement about deferred annuities? -has annuity periods that begin sometime in the future -can have a one-time premium payment -payout period must begin within 12 months of purchase -can have multiple premium payments A deferred annuity payout period must begin within 12 months of purchase
Which of the following would be most likely to purchase an immediate annuity? Newly married couple Man who received a settlement for injuries occurring from an automobile accident Couple about to adopt a baby All of the above. Man who received a settlement for injuries occurring from an automobile accident
Mrs. Kupchock, who is 78 years old, has received the benefits of her husband's life ins policy. Although she is frail, her agent has recommended that she invest the proceeds in an immediate annuity. Her grandson does not think it is her best option. Why? An immediate annuity is a suitable option for a healthy individual who probably will live longer than most people in his/her age group. Because her life expectancy is not very good, she will probably lose most of her investment
disadvantage to deferred or immediate annuities: Once the annuity is purchased - there is no turning back - the annuitant loses access to the principal. disadvantage to immediate
disadvantage to deferred or immediate annuities: The guaranteed income may be less than could be earned in another investment disadvantage to immediate
If the annuitant does not outlive the actuarial predictions, substantial monies could be lost is a disadvantage to_________ annuities immediate
In the event of a downturn in the market, the benefit payments remain level, is an example of an advantage of _______________ immediate annuities
For those considering an immediate annuity, what is not an advantage of this type of investment? loan privileges. Annuities have no loan privileges. Once the money is put into an annuity, the annuitant usually has no access to it.
All periodic premium annuities are _______________. deferred
Margaret began receiving monthly benefits from her annuity in November of 2011. In May of 2012 her aunt passed away and she received an inheritance. She would like to provide a guaranteed income stream for twenty years. What are her options? She can purchase a life annuity certain
Annuities offer various premium payment options. Which of the following is not an annuity premium payment option? Flexible premium Indexed premium Level premium Single premium indexed premium
The owner of an annuity can stop making premium payments during the accumulation period without losing the value that has accumulated in the annuity. The right to the cash value that has accumulated in the annuity is called the - non-forfeiture option
Annuities have a variety of payout options. All of the following are annuity payout options EXCEPT: Cash (lump sum) Annuity certain Flexible payment Refund life annuity flexible payment
Izzy has a lot of money in his annuity and wants to remodel his home before retirement. He would like to make a policy loan to pay for the home upgrade. What are the main considerations when he decides how to structure the loan? Annuity plans do not have loan provisions
Mary has reached age 65 and she wants to begin a monthly income. She has funded her annuity with after tax contributions, and she wants to know what her tax liability will be going forward. Her agent explains that her tax will be calculated using: exclusion ratio
What is the exclusion ratio When a person annuitizes a non-qualified annuity, part of the money returned is considered principle and part is considered earnings. The exclusion ratio is used to determine which part of the payment will be excluded from income tax liability.
Nick has paid a large lump sum of cash to the insurance company for an immediate fixed annuity. That money will be invested by the insurance company in what fund? the company's general fund
A fixed annuity may offer any of the following income options EXCEPT: A life income without refund at death A joint income for three individuals A 10 year certain and life An installment refund annuity joint income for three individuals a joint can be for 2 people not 3
Frank has set up a monthly payment from his fixed annuity. He knows that he will receive $2,000 per month until his death. Frank's family has a history of living well into their 90s. What is Frank's biggest risk if he lives that long? inflation
Earl has deposited a large lump sum with an insurance company and he will begin receiving monthly payments next months. Earl has purchased: single premium immediate annuity
When considering a variable annuity, the prospect should review: The mortality charge, The expense charge, The investment fee for each separate account
A variable annuity has a minimum guaranteed income benefit? no
a variable annuity has a Accumulation units in the accumulation phase yes
a variable annuity has Annuity units in the income phase yes
does a variable annuity have Varying sub-accounts or investment yes
Variable annuities have all features EXCEPT: -Account values accumulate tax deferred -There are usually a variety of investment choices -Money can be withdrawn at any time without penalty -Optional riders are available for an extra charge Money can be withdrawn at any time without penalty
To have an approved presentation of a variable annuity the prospect must receive what document A prospectus and an approved illustration
In order to sell variable annuities, the sales person must be qualified. What is required to qualify to sell variable annuities Registration with FINRA and an insurance license from the state
Variable annuity withdrawals are taxed on what basis? FIFO (first in first out)
Can an equity-indexed annuity will have the following feature: A choice of multiple stock indices on which to base a return yes
Can an equity-indexed annuity will have the following feature: A crediting method for gains yes
Can an equity-indexed annuity will have the following feature: Dividends from the index chosen if any are paid no
Can an equity-indexed annuity will have the following feature: A cap rate to limit returns yes
An equity-indexed annuity will provide which benefits? A guarantee that the account balance will not decline below the initial deposit
A market value adjusted annuity differs from a fixed annuity in which ways? A market rate annuity will usually credit a higher interest rate than a fixed annuity
Since the insurance company will generally pay a higher rate on a Market Rate annuity (MVA). What is the disadvantage to the buyer? There is a surrender charge to change to a fixed annuity if interest rates change significantly downward
An ordinary deferred annuity with a decreasing term life insurance rider is called a retirement income annuity
The owner of an insurance policy and the insured are usually the same person. However, sometimes the policy owner is a different person. This is known as third party
There are many types of retirement plans. Which of the following is not a qualified plan? Defined contribution (401(k)) Defined benefit (Pension Plan) Executive Bonus SEP IRA Executive Bonus
Additional Tax qualified retirement plans may include any of the following EXCEPT: Traditional IRA Plan Keogh plan 403 (b) Plan 501 ( c) (3) plan 501 ( c) (3) plan is an organization that is chartered as a non-profit corporation, and that is not a retirement plan.
Bill has several emps that he would like to retain for the long term good of his company. He has paid in the maximum allowed on his qualified retire plan. What is a possible choice that would provide both Bill and his key employees an additional benefit? deferred compensation plan
t or f Qualified plans have specific rules or participation and non-qualified plans do not true
t or f Contributions to a non-qualified are deductible on a current basis false
t or f Highly compensated employees may be limited by qualified plans and non- qualified plans do not have the same limits. true
t or f Qualified plans are subject to annual discrimination tests and non-qualified plans are not. true
If You or your spouse are not covered by a company sponsored qualified plan can you deduct an IRA contribution from your taxable income yes
Can a roth contribution be deductible no, never
roth or traditional: Money accumulates tax deferred in the account roth
roth or traditional: Money must be withdrawn under specific guidelines to avoid penalties. roth
roth or tradional: account holder is not required to make required withdrawals after age 70 and one-half roth
Max is leaving his current employer for a new position. He has accumulated a tidy sum in his 401 (k) plan. What is his best option to maintain control over his account? Max should have his funds transferred directly to a new trustee without taking possession of the funds.
A 1035 exchange is allowed on any transactions EXCEPT: A whole life policy to a universal life policy A universal life policy to a whole life policy A life insurance policy to an annuity An annuity to a life insurance policy An annuity to a life insurance policy
why no 1035 exchange from an annuity to a life insurance policy A 1035 exchange is allowed from like products to like products. different tax rules for insurance and annuities
Mr. Brown knows that his social security benefits are determined using a formula based on his earnings. What are the 3 traditional benefits of the social security program? -Monthly disability benefits for disabled workers and their dependents -Monthly benefits for spouses of retired workers -Lump sum death benefit
Mrs. Jurandi owns a small bakery. What is her social security tax rate? 12.40%
Gail surrendered her life insurance policy for its cash value. Why was some of the cash value she received taxable? The cash received exceeded the premiums paid
If the value of each annuity is $6, and the annuitant (Andrew) receives $1,800 per month, how many annuity units does Andrew receive? 300
what is a benefit provided by an annuity contract that makes it different from other investments? An annuity contract provides income for life
Jose purchased an annuity for $20,000 and the expected return is $40,000. If the annuity pays $600 per month, what portion of the $600 is taxable? $300 (half of it)
A variable annuity separate account will be invested in which of the following types of investments? equity investments
Carla has invested in an annuity to have money at retirement. What factors will determine the amount that Carla will receive at retirement? The interest rate The total capital The payout option selected
T or F regarding life income annuity: If the annuitant is older, the payment period is longer false
T or F regarding life income annuity: If the annuitant is older, the payment is larger true
T or F regarding life income annuity: If the annuitant is younger, the shorter the payment period false
T or F regarding life income annuity: If the annuitant is older the monthly payment is smaller false
The payout option for an annuity is selected by the owner of the annuity. Can the owner of the policy change this option no, Once the payout option is selected, it cannot be changed after payments begin
___________ determine(s) the value of a separate account in an annuity during payout. annuity units
Sophie has a variable annuity. She wants to know when she reaches retirement, what percent of the total value of all accumulations units credited to her account will be converted to annuity units. %100
What is the benefit-paying period of an annuity called? annuity period
does age of beneficiary impact annuity benefit no
does age of annuitant impact annuity benefits yes
does interest and amount of proceeds impact annuity benefits yes
What is the primary function of an annuity income for life
Clancy has bought a single premium immediate annuity. He must start taking payments _____. within 12 months
What will Perry, an annuitant, receive if he selects a life with period certain as his annuity option? He will receive a payout for life or a fixed number of years - whichever is last
Sasha purchased an immediate annuity. How soon can the payment begin? within a year or less from the time it was purchased
How is the benefit amount that an annuitant receives from a variable annuity determined? Number and Value of annuity units
George has a fixed annuity. How does the change in interest rates during the annuity period caused by increased interest rates affect his payout? payout remains the same for life
What kind of annuity or annuities promises two annuitants full income for both their lifetimes? joint and survivor life annuity
James wants to have his annuity pay him until he dies, with no payments to anyone after his death. Which of the following annuities will best serve his wishes? straight life annuity
When does a deferred annuity begin to pay benefits? At a specified number of years after purchase but no sooner than at least one year after purchase
An annuity is used to protect the annuitant against which risk? risk of outliving your income
James is an annuitant receiving monthly payments from a variable annuity under a joint and 2/3rds to the survivor option. What will the surviving annuitant receive when the primary annuitant dies? Monthly payments for life of a dollar value of two thirds of the annuity units that were previously being distributed
Who is responsible for regulating the separate account of a variable annuity? SEC
The ____________ is used to calculate the tax-free portion of an annuity payment exclusion ratio
Averaging out the cost of units during pay-in period is referred to as dollar cost averaging
Who are regulated by NASD when selling variable annuities? brokers and dealers
For what period of time does a joint and survivor income option on an annuity pay? it ceases when the second annuitant dies
Who is responsible for regulation of variable annuities? SEC and state insurance department
Can Vicki, who has a valid life insurance license in the state, also sell variable annuities? Yes if she has a Series 6 or Series 7 license
When does the fixed income, paid to two or more annuitants at the same time, under a joint and survivor annuity, stop? at the death of the last annuitant
An annuitant bought an immediate annuity at the age of 60. When she turned 65, she decided that she wanted to stop the annuity, get a refund of the remaining amount, and move to Brazil. What does the annuity company do? continue sending monthly checks
The benefit amount that an annuitant receives from a variable annuity is determined by the number and value of annuity units
Before variable annuity benefits can be paid out, accumulation units must be converted to: annuity units
Tax Sheltered Annuity plans are available to employees of the following type of organizations: Public school systems and other "Not for profit" groups
Daniel accumulated $80,000 in his annuity. He is receiving $800/month and each unit is worth $2.00. How many units does he receive each month? 400
Variable Annuities were created in order to do To protect against inflation
A Variable Annuity Company's separate account is regulated by which of the following: SEC
Which of the following retirement plans does NOT automatically qualify for a federal income tax deduction. Single premium deferred annuity SEP 403b Corporate pension plan Single premium deferred annuity
Who is entitled to a paid-up deferred variable annuity? Annuitants who discontinue premium payments
Rich wants to have income for life and he also wants his wife Pam to continue to receive income for the rest of her life upon his death. Which should Rich choose? joint and survivor annuity
If an annuity owner receives $2000.00 a month, and value of each annuity unit is $2, how many units does he receive monthly? 1000
t or f annuities are designed to completely replace income after retirement false
Jacob wants to receive income for the rest of his life. He wants his daughter to continue to receive the income for her life - after he dies. Which of the following should Jacob choose? joint and survivor
Which of the following is NOT often included in variable annuity options. A lump sum payout An income for life A list of beneficiaries A specified period of time a lump sum payout
Variable annuities guarantee ___________. against outliving your income
What is the period called from when the annuity contract is issued to when the payments start? accumulation period
Accumulation units must be converted into ________ before variable annuity benefits can be paid out. annuity units
Anthony is continuing to buy when the stock market levels are fluctuating. This activity, which tends to average out the cost of units during the pay-in period, is called - dollar cost averaging
Brad purchased a fixed annuity for $40,000 that has a guaranteed benefit of $50,000. What will be the exclusion ratio? 80%
Who is responsible for the regulation of variable life insurance? SEC and state insurance department
In regards to characteristic of a "joint and survivor" annuity True or False: A variable monthly lifetime income for two people based upon the performance of the annuities mutual funds. true
In regards to characteristic of a "joint and survivor" annuity True or False: The payout may be reduced to the survivor to allow more income while both are alive true
In regards to characteristic of a "joint and survivor" annuity True or False: The company cannot use the sex of the individuals as a payout factor false, The actuarial tables say women live longer than men, therefore the company can use the sex of the individual as a payout factor.
In regards to characteristic of a "joint and survivor" annuity True or False: A predictable monthly income for life for two people based upon an interest rate in effect at the time it is annuitized. true
Under a variable annuity policy, when will a paid-up deferred variable annuity be issued? when premium payments are discontinued
What must happen before the payout phase begins on an annuity? Accumulation units must be converted to annuity units
How is an immediate annuity purchased? with a lump sum payment
Which of the following is the annuity option which will not cover life's contingencies? Period Certain Cash refund 10-year life certain Straight life period certain
Kimberly works for a non-profit, charitable organization. What distinct class of retirement plans is available to Kimberly and other employees of certain nonprofit charitable organizations? a tax sheltered annuity
In a variable annuity, who is responsible for regulating the separate account? SEC
can deferred annuities have flexible premiums yes
can deferred annuities have level premiums yes
T or F With a level premium, a fixed amount is paid - in installments - until the annuity income starts. true
Created by: 100000819223738