Final answer:
The incorrect statement about annuity payout options is that 'In a cash refund annuity, the beneficiary always receives an amount equal to the beginning annuity fund plus all interest.' Beneficiaries receive the remaining funds not paid out before the annuitant's death, which could be less than the initial fund plus interest.
Step-by-step explanation:
The statement that is NOT correct regarding annuity payout options is: D) In a cash refund annuity, the annuitant's beneficiary always receives an amount equal to the beginning annuity fund plus all interest. In reality, the beneficiary will receive the remaining funds, if any, that were not already paid out to the annuitant before their death, which may be less than the initial fund plus interest.
Annuities are a type of retirement savings that provide fixed payments to individuals, often after retirement. However, when considering annuity payout options, it is essential to understand the terms of each option:
- Straight life annuity options provide payments for the lifetime of the annuitant but cease upon their death.
- Period certain annuity options guarantee payments for a specific period, regardless of the annuitant's lifetime.
- Joint and survivor annuities guarantee payments over the lives of two individuals, typically until both have passed away.