Exam 14: Annuities and Individual Retirement Accounts

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.

Brad funded a life annuity through installment payments. At age 60, he decided to elect an annuity settlement option and to begin to receive payments. Which of the following annuity payout options will provide Brad with the highest monthly income?

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). Assume that Juanita receives 12 monthly payments of $500 the first year. How much taxable income must she report?

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.

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.

Which of the following is an advantage of a longevity annuity (longevity insurance)?

The fundamental purpose of a variable annuity is to

Which of the following statements is (are) true with regard to the adequacy of IRA funds during retirement? I.To assure lifetime income, the IRA funds can be used to purchase a life annuity. II.The duration of IRA benefit payments depends on the rate of return earned on the invested assets after retirement and the withdrawal rate.

Carl is concerned that if he purchases an equity 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?

Which statement is true regarding IRA distributions?

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

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

Which of the following statements about variable annuities is true?

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

When selling life annuities, what risk is the insurer pooling?

Which of the following statements is (are) true with regard to IRAs? I.Contribution limits are higher for workers aged 50 and older. II.The minimum distribution rules after attainment of age 70.5 do not apply to Roth IRAs.

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

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.

Which of the following is a permissible IRA investment alternative?

With an equity-indexed annuity, what name is given to the method of crediting excess interest to the annuity?