Which of the following best describes the payment structure of annuities?

The payment structure of annuities is best described by the inclusion of both taxable and non-taxable components. Annuities typically consist of contributions made with after-tax dollars, which means that the principal (the amount you contributed) is not taxed upon withdrawal. However, any earnings or interest accrued on that principal are taxable as income when distributed. This tax-treatment structure makes option B the most accurate because it highlights the dual nature of the payments received from an annuity, where the principal is not taxable, while the earnings are.

The other options do not provide a complete or accurate reflection of how annuities operate. Fixed payments are a feature of some annuities but are not universally applicable; annuities can also be variable, where payments can fluctuate based on market performance. The choice regarding only taxable income upon withdrawal fails to account for the principal being non-taxable. Lastly, stating that there are no premium payments required for tax benefits is misleading, as in most cases, there are initial contributions (premiums) that are necessary to develop the investment and its associated tax advantages. Thus, option B encompasses the nuanced payment framework inherent in annuities.