Question

Part 1: A premature withdrawal from an annuity

A) is any withdrawal prior to the date the contract is scheduled to be annuitized.

B) can trigger a tax penalty if the distribution is not over the annuitant's lifetime.

C) can be used to avoid the tax that would apply if the contract is annuitized.

D) always results in the imposition of a surrender charge by the insurer.

Part 2: In planning for retirement, it is reasonable for most people to assume that

A) social security benefits will provide most of the income required.

B) the social security system will continue, but possibly on a modified basis.

C) a major part of the retirement income need will come from employment.

D) taxes will not be a significant expense.

Answer 1

1 : B

Premature withdrawal from annuity means withdrawing from the annuity before the life of the same. This will attract tax penalty if done beofre the lifetime of the annuitant. Hence options A and C are incorrect. Option D is incorrect since it may or may not result in surrender charges.

2: B

While planning retirement most people should reasonably assume that the social security system will continue with certain modifications. It will be a small portion of the total income requirements. Hence option A is false. The retirement income will not come from employment and so option C is incorrect. Taxes play an important role in retirement planning and so option D is false.