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Fundamentals of Risk and Insurance, 11th Edition by Therese M. Vaughan, Emmett J. Vaughan

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CHAPTER OBJECTIVES

When you have finished this chapter, you should be able to

  • Explain the general nature of annuities and describe the manner in which they can help to deal with the retirement risk
  • Discuss the tax treatment of annuities, and explain the ways in which this tax treatment is advantageous to the purchaser
  • Differentiate among the various classes of annuities, and explain the distinguishing characteristics of each class
  • Explain the way in which employer contributions to a qualified pension plan are treated under federal tax laws and the way in which this treatment benefits workers covered under such plans
  • Identify and explain the difference between the defined contribution and defined benefit approaches in qualified retirement plans
  • Describe the basic features of qualified retirement plans, including benefits and vesting
  • Explain the provisions of the Internal Revenue Code (IRC) relating to Individual Retirement Accounts (IRAs) and explain the benefits that arise both from deductible and nondeductible contributions to IRAs

In this chapter, we leave our extended discussion of life insurance and examine other products sold by life insurers: annuities. In addition, we will examine a related topic, pension benefits under qualified retirement plans, which generally make use of the annuity principle. Our discussion of pensions in this chapter focuses on those features of qualified ...

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