Minnesota Life Insurance License Practice Exam

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Study for the Minnesota Life Insurance License Exam. Prepare with flashcards and multiple choice questions, each question offers hints and explanations. Get ready to succeed!

Practice this question and more.

What type of plan typically offers tax benefits that are not applicable to non-qualified plans?

Group life insurance
Individual retirement account (IRA)
Individual annuity
Term life insurance

The correct answer is: Individual retirement account (IRA)

An Individual Retirement Account (IRA) is a type of plan that provides specific tax advantages designed to encourage individuals to save for retirement. Contributions made to a traditional IRA can be tax-deductible, meaning that they can reduce taxable income in the year in which they are made. Additionally, the investment growth within the IRA is tax-deferred, allowing savings to accumulate over time without being taxed until withdrawal, typically during retirement when individuals may be in a lower tax bracket. These tax benefits are not available with non-qualified plans, which do not offer tax-deductible contributions or tax-deferred growth. Options like group life insurance, individual annuities, and term life insurance may offer other benefits, but they do not provide the same level of tax advantages specifically tied to retirement savings as an IRA does. Thus, when discussing plans that offer significant tax benefits specifically for saving for retirement, an IRA is the clear example.