Which annuity can be funded with a lump-sum or periodic payments and is typically used when the beneficiary is under 59½?

Which annuity can be funded with a lump-sum or periodic payments and is typically used when the beneficiary is under 59½?

• A. Immediate annuity
• B. Deferred annuity
• C. General account
• D. Surrender charge

Answer: (B)

This item tests understanding of why deferring income is advantageous and how flexible funding works. A deferred annuity is built to grow funds now and start paying them out later. It can be funded with either a lump-sum (single premium) or periodic payments (flexible premium), giving you options to contribute over time. The idea behind using a deferred annuity when the beneficiary is under 59½ is to accumulate and grow the funds before taking distributions, postponing payouts to an age when withdrawals are more appropriate or penalties are not a concern. An immediate annuity, by contrast, starts paying right away, which isn’t aligned with deferring income for a younger person. A general account isn’t an annuity contract, and a surrender charge is simply a fee that may apply if you withdraw early, not a type of annuity.

This item tests understanding of why deferring income is advantageous and how flexible funding works. A deferred annuity is built to grow funds now and start paying them out later. It can be funded with either a lump-sum (single premium) or periodic payments (flexible premium), giving you options to contribute over time. The idea behind using a deferred annuity when the beneficiary is under 59½ is to accumulate and grow the funds before taking distributions, postponing payouts to an age when withdrawals are more appropriate or penalties are not a concern. An immediate annuity, by contrast, starts paying right away, which isn’t aligned with deferring income for a younger person. A general account isn’t an annuity contract, and a surrender charge is simply a fee that may apply if you withdraw early, not a type of annuity.