Shop Courses > Annuities

Annuities #290126

Course Overview

Credit

Amount

CPA

CFP^®

CDFA^®

IAR/FINRA

Course Author: Paul J. Winn CLU ChFC Field of Study (CPA): Specialized Knowledge Field of Study (CFP): Investment Planning, Retirement Planning Field of Study (CDFA): Investment Planning Field of Study (IAR): Product & Practice

Course Description

Course publication/revision date: This course was updated on 1/23/2026.

This course examines the annuity concept and explains what an annuity is and how it works:
-The mechanics of the accumulation and payout phases of an annuity, including sample calculations
-Settlement options and their appropriate uses
-Annuity taxation: Federal income tax treatment of premature withdrawals; lump-sum distributions; and periodic payments.
-A comparison of the different annuity contracts available with respect to client suitability.
Variable and fixed annuities are discussed in terms of single vs. periodic premium, immediate vs. deferred, qualified vs. non-qualified, and settlement options.

Table of Contents

About This Course1

How You Will Learn	1
Why This Information is Important and How You Can Use It	1

Chapter 1 - Introduction to Annuities and Annuity Buyers2

Important Lesson Points	2
Chapter Learning Objectives	2
Introduction	2
Demographics of Non-Qualified Annuity Purchasers	3
Annuity Demographic Changes	4
Why Buyers Purchase Non-Qualified Annuities	4
Guaranteed Lifetime Income Study	5
Anticipated Annuity Market	6
The Annuity Concept	6
Annuities in Operation	7
Summary	8
Test Your Comprehension	9

Chapter 2 - Characteristics of Annuities10

Important Lesson Points	10
Chapter Learning Objectives	10
Introduction	10
Premiums	11
Single Premium Annuities	11
Level Premium Annuities	11
Flexible Premium Annuities	11
Annuity Expenses	12
Surrender Charges	12
M&E Charges and Investment Advisory Fees	13
Lives Covered by the Annuity	13
Multiple Life Annuities	13
When Payout Begins	14
Deferred Annuity	15
Immediate Annuity	15
Cash Value Accumulation	15
Fixed Annuities	16
Variable Annuities	16
Death Benefits	18
Annuitization Methods	18
Temporary Annuity	18
Life Annuity	19
Annuities and the SECURE Act 2.0	21
Qualifying Longevity Annuity Contracts	21
Divorce After QLAC Purchase	21
Penalty on Partial Annuitization	22
Summary	22
Test Your Comprehension	23

Chapter 3 - Variable Annuities25

Important Lesson Points	25
Chapter Learning Objectives	25
Introduction	25
Separate Account and Structured Investment Option	26
Insurer's General Account Supports Variable Annuity's Fixed Account	26
Deferred Annuity Accumulation	27
Variable Subaccounts Comprise Insurer's Separate Account	27
Variable Subaccount Value may Fluctuate Daily	28
VA Accumulation Units	28
Structured Investment Option	29
Managing Separate Account Volatility	30
Separate Account Management Tools	30
Diversification	31
Asset Allocation	31
Automatic Subaccount Re-balancing	31
Fund Transfer	32
Dollar Cost Averaging	32
Interest Sweep	32
Variable Annuity Death Benefits	33
Traditional Variable Annuity Death Benefit Guarantee	33
Variable Annuity Rollup Death Benefit Guarantee	34
Variable Annuity Step-Up Death Benefit Guarantee	34
Living Benefit Guarantees	34
Guaranteed Minimum Income Benefit	34
Guaranteed Minimum Accumulation Benefit	35
Guaranteed Withdrawal Benefit	35
Variable Annuity Payout (Annuitization) Phase	35
Mechanics of Variable Annuitization	36
Features and Benefits	37
Suitability	38
Compliance Requirements	38
Combining Fixed and Variable Annuities	39
Summary	40
Test Your Comprehension	40

Chapter 4 - Types of Fixed Annuity Contracts42

Important Lesson Points	42
Chapter Learning Objectives	42
Introduction	42
Traditional Declared-Rate Annuities	43
Bonus Annuities	44
Multi-Year Guarantee Annuities	45
Indexed Annuities	46
Current Interest Rates base on an Interest Index	46
Current Interest Rates base on an Equity Index	47
Determining Indexed Annuity Cash Value	47
Index Call Options	48
Interest Crediting Methods	49
Spread	53
Cap Rate	53
Annuitization in Indexed Annuity Contracts	53
Guaranteed Lifetime Withdrawal Benefits	54
Summary	56
Test Your Comprehension	56

Chapter 5 - Annuity Taxation58

Important Lesson Points	58
Chapter Learning Objectives	58
Introduction	58
Income Tax Treatment	59
Premiums	59
Cash Values	59
Surrenders and Withdrawals	62
Annuity Payments During Lifetime	64
Thumbnail Summary of Nonqualified Annuity Taxation	66
Annuitant's Death After Annuity Starting Date	67
Contract Owner's Death Before Annuity Starting Date	67
Estate Tax Treatment	68
Summary	68
Test Your Comprehension	69

Chapter 6 Annuity Sales Practices, Replacement and Disclosure Requirements71

Important Lesson Points	71
Chapter Learning Objectives	71
Introduction	72
Suitability	72
Securities Exchange Commission Rules	72
Regulation Best Interest	73
Effect of Regulation Best Interest	74
Suitability Defined	76
Suitability Requirements	76
Buyer Competence	77
Replacement and Exchange	85
Mitigation of Suitability Requirement	86
Obtaining and Maintaining Records	87
Disclosure	87
Potential Surrender Period and Surrender Charge	87
Potential Tax Penalties	88
Mortality and Expense Risk Charges and Investment Advisory Fees	88
Rider Charges and Features	89
Limitations on Interest Crediting	89
Insurance and Investment Components	89
Market Risk	90
Annuity Sales & Best Interest Obligation	90
Nature of a "Recommendation"	91
The Care Obligation	91
The Disclosure Obligation	92
The Conflict of Interest Obligation	94
The Documentation Obligation	94
Transactions not Based on a Producer Recommendation	94
Summary	94
Test Your Comprehension	95

Glossary97

Appendix A - Bond Ratings103

Appendix B - Basic Characteristics Of Securities104

Appendix C - Decisional Factors in Variable Annuity Suitability105

Appendix D - Variable Annuity Buyer Profile106

Course Details

Author: Paul J. Winn CLU ChFC

Paul J. Winn CLU ChFC — Financial Writer, Editor & Trainer. Education: B.A., St. John’s University (1961–1964); Law School, University of Virginia (1964–1965); MBA program Binghamton University (1986–1989); CLU (1985); ChFC (1987). Experience: Thirty years in the life insurance and investment industry (1965–1995). Thirty-one years as a financial writer, editor and trainer (1995–2026). Paul held positions at Mutual Life Insurance Company of New York as product developer and compensation officer; at Security Mutual Life Insurance Company as general agent, marketing vice president, and agency vice president; at Principal Financial Group as agency manager; and as president of Maryland Financial Corporation, managing a financial adviser corporation providing tax, investment and financial planning. As a writer and editor, Paul is a published book author whose books include Tax Planning from the Heart, Business Succession Planning, and Dominating Obamacare. He served as writer and editor of a major mutual life insurance company’s agent training university, created more than 200 insurance, securities and tax training courses in online, print and scripted classroom formats, and is the founder and CEO of Winn Publications LLC, a tax and insurance continuing education course licensor.

Publication/Revision Date: 1/23/2026

Course Exam Questions (online): 40 (multiple-choice)

Program Delivery Method: Self-Study (NASBA QAS Self-Study)

Available Formats of Course Text: Downloadable PDF, Printed/Mailed

Course Level, Prerequisites, and Advance Preparation Requirements

License	Course Level	Prerequisites	Advance Preparation Requirements
CPA	Overview	None	None
CFP®	Overview	None	None
CDFA®	Overview	None	None
IAR	Overview	None	None

* This program is appropriate for professionals at all organizational levels.

Sponsor ID Numbers

National Registry of CPE Sponsors I.D.: 107615

CFP Board Sponsor I.D.: 1008 — Course I.D.: 222058

Registered with the Institute for Divorce Financial Analysts

NASAA Sponsor I.D.: S17460 — Course I.D.: C80848

State CPA Board Sponsor ID Numbers (where applicable)

Florida Division of Certified Public Accounting: 0004761

Hawaii Board of Public Accountancy: 14003

New York State Board for Public Accountancy: 002146

Ohio Accountancy Board: CPE .51 PSR

Pennsylvania State Board of Accountancy: PX178025

Texas State Board of Public Accountancy: 009349

Learning Objectives

As a result of studying the course material, you should be able to meet the objectives listed below:

Describe a typical annuity buyer and the principal reasons individuals buy annuity contracts
List the characteristics of annuities and the benefits of tax deferral
Explain how variable annuities work
Identify the cash value management tools available to a variable annuity contract owner
List the factors to be considered in determining variable annuity suitability
Calculate interest to be credited under various fixed annuity contracts
Explain the operation of indexed annuities
Describe how annuities are taxed
Recognize the requirements imposed on the sale of variable annuities under Regulation Best Interest.