What Do You Know about Fixed Annuities?

Answer these four questions to test your knowledge about fixed annuities and how they may fit into your 403(b) or 457 plans.

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Who guarantees the principal and interest on a fixed annuity contract?

The issuing insurance company guarantees the principal and a minimum interest rate. For that reason, it is important to choose a vendor that has a reputation for financial strength and stability.



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True or false: Since your 403(b) or 457 plan is tax-deferred, the tax-deferred feature of a fixed annuity adds no additional tax benefit.

True.


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Wrong!

True or false: You can only purchase a fixed annuity contract within a 403(b) or 457 plan.

False. You don't need a 403(b) or 457 plan to purchase a fixed annuity; you can purchase one outside your plan.


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Wrong!

What is a surrender fee?

Surrender fees are charged by most fixed annuities if you decide to cancel the contract before the surrender period is up. Most fixed annuities charge these fees for six to seven years, starting at about 7% and dropping down a percentage point each year until it reaches zero. However, some fixed annuities charge higher percentages and/or have a longer surrender period.