Annuities and Insurance Products in Retirement Flashcards
6 cards from real CRPC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Annuities and Insurance Products in Retirement flashcards as text
What does a guaranteed minimum withdrawal benefit (GMWB) rider on a variable annuity provide?
Answer: A guarantee of a minimum annual withdrawal percentage for life regardless of account performance
A GMWB rider guarantees the contract owner can withdraw a specified percentage of the benefit base each year for life, even if the account value is fully depleted.
What is the 'benefit base' in an annuity living benefit rider?
Answer: A notional value used to calculate guaranteed withdrawals, often growing at a set roll-up rate
The benefit base is a separate notional account used only to calculate guaranteed withdrawal or income amounts, and may grow through roll-up credits even when the actual account value declines.
Which annuity rider waives surrender charges if the owner is confined to a nursing home or hospital?
Answer: Confinement waiver rider
A confinement waiver rider suspends surrender charges if the annuity owner is confined to a nursing home or hospital for a qualifying period, providing liquidity during a health crisis.
What is the typical surrender charge period for most deferred annuities?
Answer: 5–10 years
Most deferred annuities have surrender charge periods of 5–10 years, during which early withdrawals above free withdrawal allowances incur a declining surrender charge.
Under LIFO (last in, first out) tax rules for non-qualified deferred annuities, how are withdrawals taxed?
Answer: Withdrawals are treated as earnings first and are fully taxable as ordinary income until earnings are depleted
Under LIFO rules, withdrawals from non-qualified deferred annuities are treated as coming from earnings first, making them fully taxable as ordinary income until all earnings are distributed.
What is a Section 1035 exchange in the context of annuities?
Answer: A tax-free exchange of one annuity contract for another annuity contract
A Section 1035 exchange allows a tax-free transfer of an existing annuity into a new annuity contract, preserving the cost basis and deferring any accumulated gain.