Life & Health Insurance Exam Life & Health Insurance Annuities and Retirement Plans 3

Question 1

What is the IRS penalty for taking a distribution from a qualified retirement plan before age 59½, absent an exception?

Accepted Answer

10%

Answer

The IRS imposes a 10% early withdrawal penalty on distributions from qualified plans before age 59½, in addition to ordinary income tax.

Question 2

Which type of annuity credits interest based on the performance of an external market index, with a floor protecting against loss?

Accepted Answer

Indexed annuity

Answer

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.

Question 3

What is the required beginning date for taking required minimum distributions (RMDs) from a traditional IRA under current law?

Accepted Answer

April 1 of the year following the year the owner turns 73

Answer

Under the SECURE 2.0 Act, RMDs must begin by April 1 of the year following the year the IRA owner turns 73.

Question 4

A deferred annuity in its accumulation phase is best described as:

Accepted Answer

Building up value before income payments begin

Answer

During the accumulation phase of a deferred annuity, premium payments and earnings accumulate on a tax-deferred basis before income payments commence.

Question 5

Which retirement plan type allows employees to make pre-tax salary deferral contributions and is commonly offered by private sector employers?

Accepted Answer

401(k)

Answer

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.

Life & Health Insurance Exam Practice Test

Life & Health Insurance Exam Practice Test

Life & Health Insurance Exam Life & Health Insurance Annuities and Retirement Plans 3