South Carolina Insurance Practice Exam

Which of the following is NOT considered a purpose of an annuity?

1. To provide a steady income stream

2. To defer taxation on earnings

3. To create an estate

4. To manage retirement savings

The correct answer is: To create an estate

An annuity is primarily designed to serve specific financial needs, particularly in relation to retirement and income planning. The purposes of most annuity products include providing a steady income stream during retirement, deferring taxation on the earnings generated by the investments within the annuity, and managing retirement savings to ensure that individuals have adequate funds for their later years. Creating an estate, however, is not typically viewed as a primary purpose of an annuity. While some annuities may have features that allow for the potential transfer of benefits or a death benefit to heirs, the fundamental design of annuities focuses on income generation and financial security in retirement rather than estate creation. Therefore, while they can contribute to estate planning in a broader context, the main purposes of an annuity do not include creating an estate, making this option the correct choice in identifying something that is NOT considered a primary purpose of an annuity.