Which of the following is not true regarding the accumulation period of an annuity

Q: What occurs during the accumulation period of an annuity quizlet?

It would not occur in a deferred annuity - The accumulation period is the period of time over which the annuity owner makes payments (premiums) into an annuity. This is the period of time during which the payments earn interest and grow tax deferred (which would be the case in a deferred annuity).

The income payments from a deferred annuity often start many years later. Deferred annuities have an accumulation period, which is the time between when you start paying premiums and when income payments start. During the accumulation period of a fixed deferred annuity, your money, less any applicable charges, earns interest at rates set by the insurance company or in a way spelled out in the annuity contract. During the payout period, the amount of each income payment to you is generally set when the payments start and will not change. During the accumulation period of a variable annuity, the insurance company puts your premiums, less any applicable charges, into a separate account.

Table of Contents Show

Know How Interest Rates are Set
Know What Charges May be Subtracted from Your Fixed Deferred Annuity
Contract Benefits of Fixed Deferred Annuities
Tax Treatment of Annuities
Take Advantage of the “Free Look” Provision
Is a Fixed Deferred Annuity Right for You?
Some Questions Your Agent Should be Able to Answer
Review Your Contract Carefully
What is true regarding the accumulation period of an annuity?
Which of the following is not true regarding the annuity?
What occurs during the accumulation period of an annuity quizlet?
Which of the following is not a term for the period of time which the annuitant or beneficiary receives income?

You decide how the company will invest those premiums, depending on how much risk you want to take. During the payout period of a variable annuity, the amount of each income payment to you may be fixed (set at the beginning) or variable (changing with the value of the investments in the separate account).

Know How Interest Rates are Set

During the accumulation period, your money, less any applicable charges, earns interest at rates that change from time to time. Usually, what these rates will be is entirely up to the insurance company. The current rate is the rate the company decides to credit to your contract at a particular time. The company will guarantee it will not change rates for a certain time period.

The minimum guaranteed interest rate is the lowest rate your annuity will earn. This rate is stated in the contract. Some annuity contracts apply different interest rates to each premium you pay or to premiums you pay during different time periods. Other annuity contracts may have two or more accumulated values that fund different benefit options. These accumulated values may use different interest rates. You get only one of the accumulated values depending on which benefit you choose.

Know What Charges May be Subtracted from Your Fixed Deferred Annuity

Most annuities have charges related to the cost of selling or servicing it. These charges may be subtracted directly from the contract value. Ask your agent or company to describe the charges that apply to your annuity. Some examples of charges, fees and taxes are surrender or withdrawal charges, free withdrawal, contract fee, transaction fee, percentage of premium charge and premium tax.

Contract Benefits of Fixed Deferred Annuities

Companies may offer various income payment options. You or another person that you name may choose the option. If you choose Life Only, the company pays income for your lifetime. Life Annuity with Period Certain pays income for as long as you live and guarantees to make payments for a set number of years even if you die. If you choose Joint and Survivor, the company pays income as long as either you or your beneficiary lives. In some annuity contracts, the company may pay a death benefit to your beneficiary if you die before the income payments start.

Tax Treatment of Annuities

Under current federal law, annuities receive special tax treatment. Income tax on annuities is deferred, which means you are not taxed on the interest your money earns while it stays in the annuity. Tax-deferred accumulation is not the same as tax-free accumulation.

An advantage of tax-deferral is that the tax bracket you are in when you receive annuity income payments may be lower than the one you are in during the accumulation period. You will also be earning interest on the amount you would have paid in taxes during the accumulation period. Most states’ tax laws on annuities follow the federal law. You should consult a professional tax advisor to discuss your individual tax situation.

Take Advantage of the “Free Look” Provision

Many states have laws that give you a set number of days to look at the annuity contract after you buy it. If you decide during that time that you do not want the annuity, you can return the contract and get all your money back. This is often referred to as a "free look" or "right to return" period. The "free look" period should be prominently stated in your contract. Be sure to read your contract carefully during the "free look" period.

Is a Fixed Deferred Annuity Right for You?

You should think about what your goals are for the money you put into any annuity. You need to think about how much risk you are willing to take with the money as well.

Ask yourself the following questions: How much retirement income will you need in addition to what you will get from Social Security and pension, will you need that additional income only for yourself or yourself and others, how long can you leave money in the annuity and does the annuity let you withdraw money when you need it.

Some Questions Your Agent Should be Able to Answer

A few questions that you should ask your agent are: Is this a single premium or multiple premium contract, what is the initial interest rate and how long is it guaranteed, what is the guaranteed minimum interest rate, can I get a partial withdrawal without paying surrender, or other charges and is there a death benefit.

Review Your Contract Carefully

Before you decide to buy an annuity, you should review the contract. Terms and conditions of each annuity contract will vary. Ask the agent and company for an explanation of anything you do not understand. Do this before any free look period ends.

Compare information for similar contracts from several companies. Comparing products may help you make a better decision. If you have a specific question or cannot get answers you need from the agent or company, contact the Department.

What is true regarding the accumulation period of an annuity?

For an annuity, the accumulation period is the segment of time in which contributions to the investment are made regularly. The length of the accumulation period may be specified at the time the account is created, or it may depend on when you elect to withdraw funds based on your retirement timeline.

Which of the following is not true regarding the annuity?

Which of the following is NOT true regarding the annuitant? The annuitant cannot be the same person as the annuity owner.

What occurs during the accumulation period of an annuity quizlet?

It would not occur in a deferred annuity - The "accumulation period" is the period of time over which the annuity owner makes payments (premiums) into an annuity. This is the period of time during which the payments earn interest and grow tax deferred (which would be the case in a deferred annuity).