Life & Health Insurance Annuities and Retirement Plans Flashcards
7 cards from real Life & Health Insurance Exam practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Life & Health Insurance Annuities and Retirement Plans flashcards as text
What is the IRS penalty for taking a distribution from a qualified retirement plan before age 59½, absent an exception?
Answer: 10%
The IRS imposes a 10% early withdrawal penalty on distributions from qualified plans before age 59½, in addition to ordinary income tax.
Which type of annuity credits interest based on the performance of an external market index, with a floor protecting against loss?
Answer: Indexed annuity
Fixed indexed annuities link credited interest to an external index like the S&P 500 while guaranteeing the principal will not decline due to index losses.
What is the required beginning date for taking required minimum distributions (RMDs) from a traditional IRA under current law?
Answer: April 1 of the year following the year the owner turns 73
Under the SECURE 2.0 Act, RMDs must begin by April 1 of the year following the year the IRA owner turns 73.
A deferred annuity in its accumulation phase is best described as:
Answer: Building up value before income payments begin
During the accumulation phase of a deferred annuity, premium payments and earnings accumulate on a tax-deferred basis before income payments commence.
Which retirement plan type allows employees to make pre-tax salary deferral contributions and is commonly offered by private sector employers?
Answer: 401(k)
The 401(k) plan is the most common employer-sponsored retirement plan in the private sector, allowing employees to defer pre-tax salary into the plan.
What does the exclusion ratio determine in a non-qualified annuity?
Answer: The portion of each annuity payment that is tax-free return of basis
The exclusion ratio identifies what percentage of each annuity payment represents a tax-free return of the owner's after-tax investment (cost basis).
An annuity owner dies during the accumulation phase. Which provision ensures the beneficiary receives at least the total premiums paid?
Answer: Minimum death benefit guarantee
Most deferred annuities include a minimum death benefit guarantee ensuring the beneficiary receives at least the total premiums paid, even if the account value is lower.