Exam 14: Annuities and Individual Retirement Accounts

Insurers offering variable annuities charge a number of fees and expenses.One category of fees and expenses is charged to cover the cost of record keeping,paperwork,and periodic reports to annuity owners.This expense is the

The fundamental purpose of a variable annuity is to

Which of the following statements about the withdrawal of funds from a traditional IRA is true?

Which of the following statements about converting a traditional IRA to a Roth IRA is (are)true? I.Such conversions can be done with no income tax consequences. II.Qualified distributions from a Roth IRA after a conversion are received tax-free.

Chris,age 52,invested $50,000 in a 10-year deferred annuity that pays an interest rate higher than the rate offered on bank certificate of deposits.After 10 years,Chris can annuitize the account balance,withdraw part of all of the balance,or leave the funds invested at a renewed rate of interest.The deferred annuity contract Chris purchased is a

Which of the following statements regarding the taxation of individual annuities is (are)true? I.The exclusion ratio is the percentage of the annuity income that is taxable. II.After the net cost of the annuity has been paid to the annuitant,the total annuity payment is taxable.

Carl is concerned that if he purchases a fixed indexed annuity,he will lose money long-term if the stock index declines.Which equity indexed annuity provision assures Carl that he will not lose money if he holds the equity indexed annuity to term?

During the funding period,the premiums paid for a variable annuity are used to purchase

Which of the following statements is true concerning traditional and Roth IRAs?

Which of the following statements is (are)true with respect to the cash annuity settlement option? I.The taxable portion of the distribution is subject to federal and state income taxes. II.The option results in adverse selection against the insurer as those in poor health are more likely to take cash than to annuitize the funds.

James is concerned that if he purchases a fixed immediate annuity his funds will be tied-up and not accessible if an emergency arises.His insurance agent said that a rider could be attached to his annuity to address this concern.The rider is a(n)

Juanita paid a life insurer $45,000 in exchange for an immediate life annuity.Juanita will receive $500 per month from the insurer,and her life expectancy is 15 years (180 months).If Juanita is alive 20 years later,how much of the $6,000 received during the year is taxable?

Life annuity payments are made up of all of the following EXCEPT

Daryl,age 42,quit his job.His employer offered a defined contribution pension plan,and the balance in the account was $30,000 when Daryl quit.He can avoid immediate taxation of these funds by

Which of the following statements is (are)true regarding the taxation of distributions from individual annuities? I.Individual annuity distributions are never taxable. II.Once the annuitant has recovered the premiums he or she paid for the annuity,the entire annuity distribution is taxable.

Which of the following persons can establish a traditional IRA? I.A person whose only income received is from investments. II.A 75 year-old man who has earned taxable income.

All of the following are circumstances under which withdrawals from a traditional IRA may be made prior to age 59.5 without incurring a substantial penalty EXCEPT

Stan paid an insurance company $50,000 for a fixed annuity when he was 50 years old.At age 62,Stan plans to begin to receive payments from the insurer.There are no guarantees on the number of payments he will receive.Based on the description provided,this annuity can be described as a(n)

Some insurers offer a single-premium deferred annuity that does not begin paying benefits until an advanced age,such as 85.This product is called a(n)

All of the following statements about traditional and Roth IRAs are true EXCEPT