Life & Health Insurance Annuities and Retirement Plans Questions and Answers

Question 1

An individual is about to retire and wants to purchase an annuity that will provide a guaranteed income stream for them and their spouse for as long as either of them is alive.
Which annuity payout option would be most suitable for this goal?

Accepted Answer

Joint and Survivor

Answer

Life with Period Certain

Answer

Fixed Period

Answer

Life Only (Straight Life)

Question 2

In which type of annuity does the policyowner bear the investment risk, with the potential for higher returns but also the possibility of loss of principal?

Accepted Answer

Variable Annuity

Answer

Fixed Annuity

Answer

Equity-Indexed Annuity

Answer

Single Premium Immediate Annuity (SPIA)

Question 3

An employee leaves their job and receives a check for the entire balance of their 401(k). To avoid current taxation and penalties, what must they do?

Accepted Answer

Deposit the full amount, including the 20% withheld, into a Rollover IRA within 60 days.

Answer

Deposit the funds into a new employer's 401(k) within 90 days.

Answer

Complete a direct rollover to an IRA immediately.

Answer

Pay income tax on the distribution and invest the remainder in a non-qualified annuity.

Question 4

Which of the following statements correctly describes a key difference between a qualified and a non-qualified annuity?

Accepted Answer

Qualified annuities are funded with pre-tax dollars, and the entire distribution is subject to ordinary income tax.

Answer

Qualified annuities are funded with after-tax dollars, and only the earnings are taxed upon withdrawal.

Answer

Non-qualified annuities have IRS-imposed contribution limits, while qualified annuities do not.

Answer

Withdrawals from non-qualified annuities before age 59 ½ are never subject to a 10% penalty.

Question 5

During which phase of a deferred annuity are premiums paid and the contract value grows on a tax-deferred basis?

Accepted Answer

Accumulation Period

Answer

Payout Period

Answer

Annuitization Period

Answer

Liquidation Period

Question 6

A 45-year-old individual is covered by a retirement plan at work and has a high modified adjusted gross income (MAGI) that exceeds the limits for a deductible IRA contribution. They still want to save for retirement in an IRA. Which of the following is a permissible action?

Accepted Answer

Make a non-deductible contribution to a Traditional IRA.

Answer

Make a fully deductible contribution to a Traditional IRA.

Answer

Make a tax-deductible contribution to a Roth IRA.

Answer

They are prohibited from contributing to any type of IRA.