Exam 18: Retirement Planning and Annuities

Jill, age 39, can buy a deferred annuity that will pay $100 per month beginning at age 65 and will continue until her death for a single premium today of $1,000. Jack, age 37, can buy a deferred annuity that will pay $100 per month beginning at age 65 and will continue until his death for a single premium today of $900. What can be said about the single premium that would be required of Jill and Jack for a joint and 100 percent survivor annuity that will pay $100 per month beginning at age 65?

Which of the following would have the highest current value?

A 10-year period-certain guarantee

If a single-premium immediate variable annuity is purchased for $200,000 and the average return on investment in the last five years has been 5 percent, what can be said about the size of the first monthly annuity payment?

Match the descriptions with their terms: -A/An _________________ begins paying regular annuity distributions as soon as it is purchased.

A penalty tax of 10 percent may be assessed on a withdrawal from an annuity made prior to age 59.5. This tax is in addition to ordinary income tax payable on the withdrawal.

Match the descriptions with their terms: -The _________________ represents the portion of each annuity payment that is not included in the recipient's taxable income.

Annuities are generally purchased as a way to guard against the possibility that the annuitant will suffer a premature death.

After the total purchase price of an annuity has been excluded from income, the subsequent benefit payments are fully taxable.

An annuity certain contains a survivorship element.

The benefits associated with variable annuities are expressed in terms of annuity units that fluctuate with the performance of an investment portfolio.

An immediate annuity is one in which benefits begin as soon as the annuity is purchased.

An annuity that would be particularly suitable for saving from an unstable income for a retirement that will take place in several years is

Which of the following is not a true statement regarding the income taxation of annuities?

A married couple with only one spouse currently working outside the home plans to retire in several years. An annuity that would be particularly suitable for saving for that retirement would be

An early withdrawal penalty tax generally will be charged on withdrawals prior to

Match the descriptions with their terms: -A/An _________________ is payable for a specified period of time, without regard to the life or death of the annuitant.

Match the descriptions with their terms: -A/An _________________ is an annuity issued on more than one life and pays as long as either annuitant is alive.

Match the descriptions with their terms: -The _________________ is the person who receives the annuity payments.

Match the descriptions with their terms: -A/An _________________ is paid for all at once.