CLU Annuities and Retirement Planning 2

Question 1

What is the penalty for withdrawals from a tax-deferred annuity before age 59½, in addition to ordinary income tax?

Accepted Answer

10% federal early withdrawal penalty

Answer

Like other tax-deferred retirement vehicles, nonqualified annuity withdrawals of gain before age 59½ are subject to a 10% federal penalty tax under IRC Section 72(q).

Question 2

In a variable annuity, how is the account value determined during the accumulation phase?

Accepted Answer

By the performance of the underlying investment subaccounts chosen by the owner

Answer

Variable annuity values fluctuate based on the investment performance of the owner-selected subaccounts, which function similarly to mutual funds, bearing all market risk.

Question 3

What is a 'joint and survivor' annuity payout option?

Accepted Answer

Payments continue over the lifetimes of two named individuals

Answer

A joint and survivor annuity provides income for as long as either of two annuitants is alive, with payments often reducing (e.g., 50% or 66⅔%) after the first annuitant dies.

Question 4

What is the required minimum distribution (RMD) starting age for qualified annuities and IRAs under current federal law (SECURE 2.0)?

Accepted Answer

Age 73

Answer

SECURE 2.0 Act raised the RMD beginning age to 73 for individuals who reach age 72 after December 31, 2022, with a further increase to 75 scheduled for 2033.

Question 5

Which type of annuity begins income payments immediately — typically within one month of a single lump-sum premium payment?

Accepted Answer

Single premium immediate annuity (SPIA)

Answer

A single premium immediate annuity (SPIA) converts a lump-sum premium into a stream of income payments beginning almost immediately, making it ideal for retirees needing current income.

CLU - Chartered Life Underwriter Practice Test

CLU - Chartered Life Underwriter Practice Test

CLU Annuities and Retirement Planning 2