Annuities and Financial Planning Quiz

An annuity is a financial product that provides a series of payments at regular intervals.

Annuities offer tax-deferred growth, meaning taxes on earnings are postponed until withdrawals are made.

The accumulation phase of an annuity focuses on building funds through regular contributions and investment returns.

Immediate annuities start distributing payments shortly after purchase, offering immediate income.

Deferred annuities are designed to build up funds over time, with the aim of providing future income.

Equity annuity is not a recognized type of annuity, unlike fixed, variable, and indexed annuities.

Fixed annuities provide a guaranteed minimum return on investment, whereas variable annuities fluctuate based on underlying investments.

An annuitant is the individual who receives payments from an annuity contract.

Annuity payments are taxed at ordinary income tax rates when withdrawn.

The annuity factor is a mathematical factor used to calculate the income stream from an annuity based on various factors such as age, payout option, and interest rates.

The surrender period is the timeframe during which an annuity issuer can impose a fee for withdrawing funds before a specified duration.

An annuity rider is an extra feature or provision that can be added to the base annuity contract, offering additional benefits or options.

In a variable annuity, the income stream is determined by the performance of the underlying investment options chosen by the annuitant.

The main risk of a variable annuity is market risk, as the value of the investment options can fluctuate based on market performance.

The surrender value in an annuity is the amount that the annuitant receives upon surrendering the annuity before the conclusion of the surrender period.