#1
What is an annuity?
A series of equal periodic payments
ExplanationAn annuity consists of regular, fixed payments over a defined period.
#2
In retirement planning, what does the term 'nest egg' refer to?
The total amount of money saved for retirement
ExplanationA nest egg is the cumulative savings earmarked for retirement.
#3
What is the 'annuitization' of an annuity?
The process of converting the annuity into a series of periodic payments
ExplanationAnnuitization is when an annuity transforms into a stream of payments.
#4
What is the key difference between a fixed annuity and a variable annuity?
Fixed annuities have a fixed interest rate, while variable annuities offer variable returns based on market performance
ExplanationFixed annuities offer stable interest rates, while variable annuities fluctuate with market performance.
#5
In the context of annuities, what does 'accumulation phase' refer to?
The initial phase when you contribute funds to the annuity
ExplanationIt's the period of contributing funds to the annuity before receiving payouts.
#6
How does a 'joint and survivor annuity' differ from a 'single-life annuity'?
Joint and survivor annuity covers two individuals, while single-life annuity covers one individual
ExplanationJoint and survivor annuities provide benefits for two people, unlike single-life annuities.
#7
What is the primary purpose of a 'guaranteed lifetime withdrawal benefit' (GLWB) in annuities?
To guarantee a certain level of income for life, even if the account value falls to zero
ExplanationGLWB ensures a minimum level of income regardless of account performance.
#8
What is the 4% rule in retirement planning?
A rule of thumb suggesting you withdraw 4% of your retirement savings annually
ExplanationThe 4% rule advises withdrawing 4% annually from retirement savings.
#9
What is the purpose of a 'life annuity with period certain'?
To provide lifetime income with a guaranteed period of payments
ExplanationIt offers lifelong income with a specific duration of guaranteed payments.
#10
What is the concept of 'sequence of returns risk' in retirement planning?
The risk of market volatility affecting the order of investment returns
ExplanationIt's the risk that the timing of market fluctuations impacts investment returns.
#11
What is a 'qualified longevity annuity contract' (QLAC) designed to address?
Longevity risk
ExplanationA QLAC mitigates the risk of outliving one's retirement savings.
#12
What is the impact of inflation on annuity payments over time?
Annuity payments decrease with inflation
ExplanationAs inflation rises, the purchasing power of annuity payments declines.
#13
What is the 'annuity factor' used for in financial calculations?
To calculate the present value of future annuity payments
ExplanationIt's used to determine the value of future annuity payments in today's terms.