Final answer:
In a Variable Annuity, the incorrect statement is that assets are held in the carrier's general account; instead, they are in a separate account affecting the benefits based on asset performance. The contract holder bears the investment risk, with no guaranteed interest credited unlike in fixed annuities.
Step-by-step explanation:
In a Variable Annuity, all of the following statements are true except: Assets are held in the carrier's general account to ensure the carrier's and the annuity holders interests are aligned.
This is incorrect because in a variable annuity, the assets are actually held in a separate account, and the performance of these assets, not the general account of the insurance carrier, affects the benefits.
The contract holder bears the investment risk, and the benefits vary with investment performance. Unlike fixed annuities, there is no guaranteed interest credited in a variable annuity.
Understanding different retirement saving options is crucial. While pensions, or "defined benefits" plans, offer fixed payments, the buying power can erode over time due to inflation.
Alternatively, "defined contribution" plans like 401(k)s and 403(b)s allow individuals to invest in various investment vehicles, which can provide protection against inflation through potential real rates of return.
The security chosen affects the potential for growth as well as the risk, with stocks generally offering higher returns than bonds, and bonds more than savings accounts. However, with higher potential returns comes increased risk, and it is the responsibility of the annuity holder to bear this investment risk in a variable annuity.