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Exam 14: Annuities and Individual Retirement Accounts

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Question 21

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Which of the following statements about converting a traditional IRA to a Roth IRA is (are) true? I.Such conversions can be done with no income tax consequences. II.Qualified distributions from a Roth IRA after a conversion are received tax-free.

A) I only
B) II only
C) both I and II
D) neither I nor II

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Question 22

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Which of the following statements is (are) true regarding the Roth IRA? I.Roth IRA contributions are tax deductible. II.Roth IRA investment income accumulates income-tax free.

A) I only
B) II only
C) both I and II
D) neither I nor II

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Question 23

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Juanita paid a life insurer $45,000 in exchange for an immediate life annuity.Juanita will receive $500 per month from the insurer,and her life expectancy is 15 years (180 months) .If Juanita is alive 20 years later,how much of the $6,000 received during the year is taxable?

Which of the following statements about the withdrawal of funds from a traditional IRA is true?

Which of the following statements is (are) true regarding the taxation of distributions from individual annuities? I.Individual annuity distributions are never taxable. II.Once the annuitant has recovered the premiums he or she paid for the annuity,the entire annuity distribution is taxable.

Traditionally,tables have been prepared showing how long IRA funds will last based on rates of return and annual withdrawal rates.These tables,however,assume constant returns over the projection period.Many financial planners are now using a technique that allows for fluctuations in market returns.A computer is programmed to estimate how long funds will last under many different return scenarios and to determine the probability that funds will last until a specified age.This technique is called

Which of the following statements regarding the taxation of individual annuities is (are) true? I.The exclusion ratio is the percentage of the annuity income that is taxable. II.After the net cost of the annuity has been paid to the annuitant,the total annuity payment is taxable.

Bridget started to fund a variable annuity.Three years later,she experienced financial difficulty.She called her agent and cancelled the contract.The insurer returned all but 4 percent of the account balance.The 4 percent kept by the insurer is a(n)

Which of the following statements is (are) true with regard to the adequacy of IRA funds during retirement? I.To assure lifetime income,the IRA funds can be used to purchase a life annuity. II.The duration of IRA benefit payments depends on the rate of return earned on the invested assets after retirement and the withdrawal rate.

With an equity-indexed annuity,what name is given to the method of crediting excess interest to the annuity?

Which of the following statements is (are) true with respect to the cash (lump sum) annuity settlement option? I.The taxable portion of the distribution is subject to federal and state income taxes. II.The option results in adverse selection against the insurer as those in poor health are more likely to take cash than to annuitize the funds.

Juanita paid a life insurer $45,000 in exchange for an immediate life annuity.Juanita will receive $500 per month from the insurer,and her life expectancy is 15 years (180 months) .Assume that Juanita receives 12 monthly payments of $500 the first year.How much taxable income must she report?

The fundamental purpose of a variable annuity is to

Which of the following statements is true concerning traditional and Roth IRAs?

Which of the following statements is (are) true with respect to variable annuities? I.The price at which accumulation units can be purchased fluctuates during the funding period. II.The value of annuity units fluctuates over time.

Life annuity payments are made up of all of the following EXCEPT

Some insurers offer a single-premium deferred annuity that does not begin paying benefits until an advanced age,such as 85.This product is called

Which of the following is a permissible IRA investment alternative?

All of the following statements about traditional and Roth IRAs are true EXCEPT

Which of the following statements is (are) true with regard to Roth IRAs? I.The portion of a Roth IRA distribution that is attributable to investment income is taxable. II.There is a maximum income level above which Roth IRA contributions are not allowed.