AD Banker Comprehensive Practice Exam

Which of the following will receive the smallest monthly income benefit check if an annuity is annuitized?

1. 65 year old female

2. 62 year old male

3. 55 year old male

4. 50 year old female

The correct answer is: 50 year old female

When an annuity is annuitized, the amount of the monthly income benefit check is primarily influenced by the age and gender of the annuitant at the time they begin receiving payments. Annuities are structured to pay out for the life expectancy of the annuitant, and insurance companies take into account mortality rates when determining payment amounts. Individuals who are younger at the time of annuitization will typically receive smaller monthly income checks because they are expected to receive payments for a longer duration. For instance, a 50-year-old female would likely have a longer life expectancy compared to older individuals, which translates into smaller monthly payments spread over what is anticipated to be many years of payout. In contrast, the 65-year-old female will likely receive a larger monthly benefit due to her shorter life expectancy relative to the younger individuals. Similarly, the 62-year-old male and the 55-year-old male would also receive larger checks than the 50-year-old female, as their respective ages imply a slightly shorter life expectancy than someone who is only 50 years old. Thus, the 50-year-old female is anticipated to receive the smallest monthly income benefit because her younger age suggests she will be receiving payments for a longer period, resulting in smaller