Immediate vs. Deferred

Question 1

What are Immediate Annuities?

Answer 1

• An immediate annuity serves only to distribute income.
• not purchased with accumulation goals in mind.
• often referred to as a single premium immediate annuity, or SPIA.)

Question 2

List 3 types of Deferred Annuities

Answer 2

During the deferral period, funds accumulate interest on a tax-deferred basis.

1. Single Premium Deferred Annuity

2. Fixed Premium Deferred Annuity

Also called retirement annuities, these fixed premium deferred annuities are still available for those seeking a specific amount of future income. Today’s annuity buyers generally prefer flexible premium annuities.

3. Flexible Premium Deferred Annuity

Flexible premium deferred annuities allow owners to make premium deposits of any amount whenever they want.

Question 3

What does Deferred Annuity Values Are Nonforfeitable mean?

Answer 3

Accumulated funds in a deferred annuity belong, at all times, to the owner. They are not forfeitable, even if the owner stops making premium payments.

Question 4

How long do most annuities charge a Deferred Annuity Surrender Charge?

Answer 4

While deferred annuity owners are always fully vested in their contract values, they may be required to pay a fee for withdrawing them.

Most deferred annuities apply surrender charges for the first five to ten years after contract issue.

For example, a deferred annuity may impose

• a 7% charge during the first three years of the contract;
• a 6% charge during the fourth and fifth year of the contract; or
• a 5% charge during the sixth and seventh year of the contract, and so on.

Question 5

Bailout Provision is often called a …

And it kicks in when what 2 things happen?

Answer 5

This interest rate bailout feature is sometimes called a waiver of penalties provision.

• Some deferred annuities include a bailout provision that allows surrender with charge-free withdrawals if the interest rate drops below a specified level.
• Some deferred annuities also permit the contract owner to withdraw funds from the contract at any time, without a surrender charge, if the owner becomes terminally ill or requires long-term nursing care.

These are sometimes called medical bailout provisions.

Question 6

What is the penality if you withdraw a deferred annuity before age 59 1/2?