Warm Up - What is an Annuity?

What is an annuity?

• A contract between an individual and an insurance company for a steady stream of income.

• A type of stock market investment with high returns.

• A short-term savings account for emergencies.

• A government-issued bond.

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What is a significant advantage of annuities for retirees?

• They offer unlimited investment growth.

• They provide guaranteed income that can last a lifetime.

• They allow for tax-free early withdrawals.

• They have very low fees.

What is a potential disadvantage of annuities related to costs?

• They always have fixed, low fees.

• The fees for an annuity can be very high depending on customization.

• Fees are only charged if the annuity is cancelled.

• There are no fees associated with annuities.

How are the payouts from annuities typically taxed?

• As long-term capital gains.

• They are completely tax-exempt.

• As regular income, which usually has a higher tax rate than long-term capital gains.

• Only the principal amount is taxed.

Based on the type of payout they provide, what are the three main classifications of annuities mentioned?

• Short-term, Mid-term, and Long-term.

• Immediate, Deferred, and Lump Sum.

• Fixed, Variable, and Indexed.

• Growth, Income, and Balanced.