The minimum guaranteed death benefit is provided by that portion of the payment invested in the insurance company's general account. The investor purchased accumulation units. Once a variable annuity has been annuitized: In addition, if the customer is not at least 59-, there will be a tax penalty of an additional 10%. B) Exchange traded Funds (ETFs) or Exchange traded Notes (ETNs) Your 65-year-old client owns a nonqualified variable annuity. Once the cost basis is reached, any further withdrawals are a nontaxable return of principal. Withdrawals from a nonqualified variable annuity are made on a LIFO basis, so the taxable earnings are considered taken out before principal. If you need to withdraw money from the account because of a financial emergency, you may face surrender fees. The entire amount is taxed as ordinary income. He wants to ensure that the client, in addition to meeting suitability requirements, is aware of certain variable annuity contract characteristics. Reference: 12.3.3 in the License Exam, Question #34 of 48Question ID: 606834 Contributions to a nonqualified annuity are made with the owner's after-tax dollars. Your customer in his early 30s has received a modest inheritance from a relative. B) taxed as ordinary income. The accumulation period of a variable annuity may continue for many years. What is the taxable consequence of this withdrawal to your client? IV. Usually the term "annuity" relates to a contract between an individual and a life insurance company. A) It will be higher. no. C)III and IV. The features of variable deferred annuities are many. B) be paid to any legal heirs as recognized by the annuitant's state of domicile. C) III and IV. A separate account will invest in a number of different securities. A variable annuity's separate account is: A) used for the investment of monies paid by variable annuity contract holders B) separate from the insurance company's general investments C) operated in a manner similar to an investment company D) as much a security as it is an insurance product All of the above An individual who purchases a Life annuity is given protection against: the risk of living longer than expected The type of annuity that can be purchased with one monetary deposit is called a (n) Immediate annuity N purchases an annuity by making payments in an amount no less than $100 quarterly. B) I and II. The trial of the assassins commenced on the following day; and the evidence being so clear, they were both found guilty, and condemned, to be broken alive on the wheel. \hspace{7pt} a. December 303030, to record the payroll. &&& \underline{\underline{\$341,718}} Before the contract is annuitized, your client, currently age 60, withdraws some funds for personal purposes. While variable annuities have greater potential for earnings, since their interest rate rises and falls with their underlying investments, they can lose money. What is the annual cash flow generated from the new machine? B)each annuity unit's value varies with time, but the number of annuity units is fixed. What percentile is represented by $710? The noble relatives of the Count d'Horn absolutely blocked up the ante-chambers of the regent, praying for mercy on the misguided youth, and alleging that he was insane . For example, when paying rent, the rent payment (PMT) . C) IRAs. Variable annuities are designed to combat inflation risk. Which Earns More: Variable or Fixed Annuities? B)Two-thirds of the withdrawal is taxable as ordinary income. C)III and IV Refinancing a home to draw out equity has been identified by FINRA as an abusive sales tactic regarding the sales of VAs. The $30,000 contract value represents $10,000 of contributions and $20,000 of earnings. have investment risk that is assumed by the investor a variable annuity guarantees payments for life. The growth portion is taxed as ordinary income. used for the investment of funds paid by contract holders. How Good of a Deal Is an Indexed Annuity? A) A variable annuity Variable annuities are designed to combat inflation risk. An example would be if a life annuity with 10-year period certain contract holder died after 5 years, payments would continue for 5 more years to the beneficiary and then stop. C) The ordinary income on the proceeds over the cost basis plus 10% of the net gain (if any) if Sue is younger than 59- years old. C) II and IV. Which of the following recommendations would best meet the customer profile? Question #31 of 48Question ID: 606836 The following information about the payroll for the week ended December 303030 was obtained from the records of Vienna Co.: Salaries:Deductions:Salessalaries$670,000Incometaxwithheld$198,744Warehousesalaries110,000Socialsecuritytaxwithheld51,714Officesalaries234,000Medicaretaxwithheld15,210$1,014,000U.S. A) II and III. The paper publication will not be rereleased. The following are the characteristics or the hierarchy of a trend except A. Gigatrends C. Megatrends B. Macrotrends D. Nanotrends _____11. C) A 25year old public school teacher who would like to save enough for the purchase of her first home within the next 3 to 5 years. All of the following statements about variable annuities are true EXCEPT: Immediate life annuity with 10-year period certain. Distributions from such an annuity are computed on a LIFO basis with the income taxed first. A variable annuity is a security and must be registered with the SEC, not FINRA. *Contributions to a nonqualified variable annuity are not tax deductible. This guideline has been prepared for use by Federal agencies. B) variable annuities are classified as insurance products. When a variable annuity contract is annuitized, the number of annuity units is fixed. Question #24 of 48Question ID: 606806 However, at the end of the period certain the payments to the named beneficiary (the spouse) will stop. The funds in an annuity are off-limits to creditors and other debt collectors. Fixed interest rates during the payout period The value of each accumulation unit varies: Daily Variable annuities have Variable interest rates and benefits All of the following statements are true regarding the interest rate guarantees of fixed annuities, EXCEPT: Universal variable life policies In deciding whether to put money into a variable annuity versus some other type of investment, its worth weighing these pros and cons. A variable annuity is both an insurance and a securities product. *Insurance companies introduced the variable annuity as an opportunity to keep pace with inflation. Skylar Clarine is a fact-checker and expert in personal finance with a range of experience including veterinary technology and film studies. The holder of a variable annuity receives the largest monthly payments under which of the following payout options? The customer, in the accumulation stage of the annuity, is holding accumulation units. The client agrees to purchase the contract and informs the RR that he will be cashing out a VA he purchased 2 years ago to fund the new contract and will forward the check as soon as he receives it. B) with guaranteed minimum withdrawal benefits (GMWBs) the periodic payments can be monthly, quarterly or annually B)Capital gains taxation on the earnings withdrawn in excess of the owner's basis. D) II and IV. Variable annuities offer the possibility of higher returns and greater income than fixed annuities, but theres also a risk that the account will fall in value. Future annuity payments will vary according to the separate account's performance. This recommendation is: D) unsuitable because her situation exposes her to surrender charges and early withdrawal penalties in exchange for insufficient benefits. P=525p2+65,326p185,000E=326p+185,000P=-525 p^{2}+65,326 p-185,000 \quad E=-326 p+185,000P=525p2+65,326p185,000E=326p+185,000. B) the number of annuity units is fixed, and their value remains fixed. During the payout period, payments are based on a fixed number of annuity units established when the contract was annuitized. D)suitable if she has enough equity in the home to fund the variable annuity without cashing out the other VA contract, Based on the information given in the question, the VA recommendation would not be suitable. B) During the accumulation period. IBM Noida, Uttar Pradesh, India4 weeks agoBe among the first 25 applicantsSee who IBM has hired for this roleNo longer accepting applications. *Waiver of premium is a benefit available on qualified life insurance contracts, usually in the form of a rider, which provides for the waiver of premium payments that fall due while the policyholder is totally disabled. A) Joint tenants annuity. d) What is the probability that a user is from the United States, given that he or she logs on every day? The number of variable annuity accumulation units can rise during the accumulation period when additional units are being purchased. Reference: 12.1.4.1 in the License Exam. By clicking Accept All Cookies, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts. Reference: 12.3.2.1 in the License Exam. A 45-year-old employed individual with no other retirement accounts in place An 18-year-old, unmarried high school student sought a safe investment for a $30,000 bequest until after she graduated from college. An important basic characteristic of common stocks that makes them a suitable type of investment for the separate account of variable annuities is: There is no clear answer to this. *A periodic payment immediate annuity is a contradiction in terms. a variable annuity does not guarantee payments for life. B) life income C) 10 years of variable payments. For this potential advantage, the investor, rather than the insurance company, assumes the investment risk. D) I and III. B) The entire $10,000 is taxable as ordinary income. \hspace{7pt} b. January 444, to record the employers payroll taxes on the payroll to be paid on January 444. He makes several statements regarding the contract. II. order now. B)Variable annuities. *The accumulation period of a variable annuity may continue for many years. All of the following characteristics are shared by both a mutual fund and a variable annuity's separate account EXCEPT: savingsbonds30,420Groupinsurance45,630$341,718\begin{array}{lrlr} On any device & OS. Investopedia does not include all offers available in the marketplace. an annuitant dies sooner than expected. A)Fixed annuity contract with a discussion regarding purchasing power risk Final answer. variable An immediate annuity consists of a Single Premium T has an annuity that guarantees an income payment for the rest of his life. B) The policyowner. Your customer is interested in a variable annuity but is unclear on some of the details regarding different specifications and riders that can be attached to the contract. In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. B)variable annuities are classified as insurance products. Question #40 of 48Question ID: 606800 *Funding a VA contract by cashing out either life insurance policies or existing VA contracts, especially those held for a short period of time is not suitable. Changes in payments on a variable annuity correspond most closely to fluctuations in the: Variable annuities grow tax-deferred, so you dont have to pay taxes on any investment gains until you begin receiving income or make a withdrawal. A) partially a tax-free return of capital and partially taxable. Both products typically have a wide range of options across equities, bonds and money market instruments. It is innate and universal. Ideally they should be funded with readily available cash rather than using funds liquidated from existing investments. D)the state insurance department. C) II and IV. Dividing the funds available so as to fund 2 separate contracts, whether they be joint with last survivor or life income, would not be cost efficient for spouses. A)II and IV. An example would be if a life annuity with 10-year period certain contract holder died after 5 years, payments would continue for 5 more years to the beneficiary and then stop. *Annuity death benefits are generally paid in a lump sum. Question #11 of 48Question ID: 606816 The number of annuity units rises once annuitization begins. Deferred Annuity Definition, Types, How They Work, What Is a Fixed Annuity? the state banking commission. C) be returned to the separate account. The investor has already paid tax on the contributions but the earnings have grown tax-deferred. D)I and II. Distribution can take place before or during any solicitation for sale. III) A hierarchy of corporate staff evaluates divisions' plans and performance. In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. A) The fact that the annuity payment may increase or decrease. Before buying a variable annuity, investors should carefully read the prospectus to try to understand the expenses, risks, and formulas for calculating investment gains or losses. Instructions\textsf{\textcolor{#4257b2}{Instructions}}Instructions II. Annuity death benefits are generally paid in a lump sum. Can I Borrow from My Annuity for a House Down Payment? D) A 50 year old individual with $50,000 cash to invest who has already made the maximum contributions to an IRA and the 401(k) plan at his place of employment and would like to minimize some of the tax consequences of his currently high tax bracket. The original investment has grown to a value of $60,000. A Variable Annuity has which of the following characteristics? C) 3800. e) Are From the United States and Log on every day independently? C) I and IV. \hspace{10pt} \text{Sales salaries} & \$\hspace{5pt} 670,000 & \hspace{10pt} \text{Income tax withheld} & \$198,744\\ Drives - are hardwired characteristics of the brain that correct deficiencies or maintain an internal equilibrium by producing emotions to energize individuals. Listing tax-deferred growth as an objective for retirement income, which of the following investments is most suitable? B) I and II. A customer is receiving annuitized payments from a variable annuity. Owners of variable annuities, like owners of mutual fund shares, may vote on changes in investment policy and for an investment adviser. C)100% tax deferred. With a fixed annuity, by contrast, the insurance company assumes the risk of delivering whatever return it has promised. Reference: 12.3.4 in the License Exam. The earnings are taxable but the cost basis is returned tax free. C)such an annuity is designed to combat inflation risk. The annuitized payments are viewed for tax purposes as The growth portion is taxed as a capital gain. A) I and II. A) a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero B) 100% taxable. Licensed to sell Variable Annuities in the following state(s): FL, TX . In a variable life annuity with 10-year period certain, a contract holder receives: All of the following are true about annuities EXCEPT: they have all the same characteristics as life insurance. The payout compared to last month's payout. She will receive the annuity's entire value in a lump-sum payment. C)Mortality risk. D) each annuity unit's value varies with time, but the number of annuity units is fixed. The value of accumulation and annuity units varies with the investment performance of the separate account. A security is any investment for profit with management performed by a third party. A 3 D) a variable annuity contract is subject to fluctuating values due to market fluctuations of the underlying separate accounts. Sub accounts and mutual funds are conceptually identical, but sub accounts don't have ticker symbols that investors can easily type into a fund tracker for research purposes. If your customer invests in a variable annuity and chooses to annuitize at age 65, which of the following statements are TRUE? EEO IS THE LAW . I. D)I and IV, Universal variable life policies are insurance company products that should be purchased primarily for the insurance features they offer rather than as an investment. The creation of an estate. C. As of March 03, 2023, had a relative dividend yield of % compared to the industry median of %. These contracts cover both lives and will continue to make payments until the last spouse dies. are purchased primarily for their insurance features Question #41 of 48Question ID: 606801 Reference: 12.1.2 in the License Exam. A demonstrated ability to quickly learn and continuously develop functional knowledge and an understanding of company products as well as administrative, claims, underwriting and marketing functions. D)II and IV. Your customer is interested in a variable annuity but is unclear on some of the details regarding different specifications and riders that can be attached to the contract. *Once a variable annuity is annuitized, the accumulation units are converted into a fixed number of annuity units. Describe. About Us Do whatever you want with a Learn About Annuities and Their Myths - F&G: fill, sign, print and send online instantly. A rider or statement of condition that allows a variable life insured to maintain policy coverage after becoming disabled is a benefit known as D) I and III Reference: 12.1.2 in the License Exam, Question #21 of 48Question ID: 606812 Fixed Annuity, Retirement Annuities: Know the Pros and Cons. C)Keogh plans. Future annuity payments will vary according to the separate account's performance. There are also immediate annuities, which begin paying income right away. Because common stocks are not fixed dollar investments, they have the opportunity to keep pace with inflation. A) partially a tax-free return of capital and partially taxable. D)variable annuities offer the investor protection against capital loss. Inflation-hedging, using both tax deferral combined with market growth potential, is made possible by variable annuities #. C) The investor's concerns about taxes. B) suitable if she has enough equity in the home to fund the variable annuity without cashing out the other VA contract Based on this information the RR should: Science Health Science Nursing. Her agent recommended she choose a variable annuity as a safe haven for the funds. What Are the Distribution Options for an Inherited Annuity? Accumulation Period of Fixed Annuities During this period, premiums are credited with interest which accumulates on a yearly basis. If the contract holder dies before the period expires, the remaining payments are made to the beneficiary. Based on this information the RR should: D) I and III. In March, the actual net return to the separate account was 8%. On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity). Variable Annuity Advantages and Disadvantages, Guide to Annuities: What They Are, Types, and How They Work. A) Age 56, available cash to invest, makes the maximum retirement plan contributions to an existing IRA and 401(k) plan Variable annuity salespeople must be registered with FINRA and the state insurance department. Of the answer choices given the best would be to reevaluate the recommendation based on the new information tendered by the client. D)with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed, With guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is not guaranteed because payments stop when the annuitant has received an amount equal to the principal account value or the contract term ends. C)earnings only and taxable A customer has a nonqualified variable annuity. Question #27 of 48Question ID: 606818 A) Ordinary income tax on earnings exceeding basis. Single payment deferred annuity. Supplemental income stream for retirement, not preservation of capital should be the catalyst to consider a VA and for anyone who may need access to the sum invested for any reason a VA would not be considered a suitable recommendation. A variable annuity is a type of annuity contract the value of which can vary based on the performance of an underlying portfolio of sub accounts. B)unsuitable because her situation exposes her to surrender charges and early withdrawal penalties in exchange for insufficient benefits. *Mortality risk- If an annuitant lives longer than expected, the insurance company will have to continue payments longer than expected. A variable annuity's separate account is: A separate account will invest in a number of different securities. The owner of a variable annuity has all of the following rights EXCEPT the right to vote: a. for the Board of Trustees b. to change the separate account's investment objective c. for distributing income and capital gains d. for dissolutions of the trust for distributing income and capital gains. Prudential's businesses offer a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds, asset management, and real estate services. This chapter was updated on 15 December, 2005. C) Tax-free municipal bonds She will receive the annuity's entire value in a lump-sum payment. Though there is no beneficiary designation during the annuitization, this is not an issue for this annuitant. A) I and III. Which is it? A) I and III. II) It has an internal capital market wherein each division competes for funds. B)part earnings and part cost basis B)fixed in value until the holder retires. 111. U.S. Securities and Exchange Commission. C)municipal bonds. A) be paid to a designated beneficiary. The number of accumulation units is always fixed throughout the accumulation period. C)A 10% penalty plus the payment of ordinary income tax on all of the funds withdrawn. C)I and IV. The value of an annuity unit varies from month to month according to the performance of the separate account in comparison to the assumed interest rate. A 45-year-old investor takes a lump-sum distribution from a nonqualified variable annuity. Reference: 12.1.4.1 in the License Exam. (The exception is the fixed income annuity, which has a moderate to high payout that rises as the annuitant ages). IBM is a global brand and has its presence in 170 countries and operates . Most annuities will not allow you to withdraw additional funds from the account once the payout phase has begun. B)Universal variable life policy. Because they have a separate account in which the investor assumes the investment risk, they can only be sold by individuals with both insurance and securities licenses. A)II and III *BEST Suited for VA-Age 56, available cash to invest, maxes out IRA and 401(k) plan VA will be supplemental income, would not be suitable for cust. A registered representative's (RR) customer is speaking of a variable life insurance contract he owns. Life annuity has the largest payout because less risk is assumed by the insurance company; there is no beneficiary in the event the annuitant dies. B)4200. Annuities due are a type of annuity where payments are made at the beginning of each payment period. B) II and III is required by the Securities Act of 1933. Essential Characteristics: Variable annuities gave buyers a chance to benefit from rising markets by investing in a menu of mutual funds offered by the insurer. Variable annuity Which of the following is characteristic of fixed annuities? a) What percentage of Facebook's users are from the United States? Reference: 12.1.2.1.2 in the License Exam. The number of annuity units varies. But again, the need to designate beneficiaries is not an issue for this annuitant. However, a discussion should occur regarding the risks that are associated with a fixed annuity; purchasing power risk. Her agent recommended she choose a variable annuity as a safe haven for the funds. Assuming that the payroll for the last week of the year is to be paid on December 313131, journalize the following entries: A variable annuity is a combination of 2 products: an insurance contract and a mutual fund. D) each annuity unit's value varies with time, but the number of annuity units is fixed. A)Corporate debt securities C) The portion of the premium invested in the insurance company's general account is used to provide for the minimum guaranteed amount of the death benefit. The largest monthly check an annuitant can receive for the rest of his life is generated by a straight life (life income or life only) payout option. You can tailor the income stream to suit your needs. Early withdrawal is either removal of funds from a fixed-term investment before the maturity date, or the removal of funds from a tax-deferred investment account or retirement savings account before a prescribed time. For a retired person, which of the following investments would provide the greatest protection against inflation? 8 annuities provide a guaranteed rate of return, whereas annuities provide conservative to aggressive investments whose rates of return are not guaranteed. A prospectus for a variable annuity contract: One of the following would achieve that objective but a suitability discussion regarding it's risk should also occur. B) payment guarantee. This compensation may impact how and where listings appear. A universal variable life policy should be purchased primarily for its insurance features, not its investment features. How is the distribution taxed? An accumulation unit in a variable annuity contract is: However, because the client is not yet age 59- when making the withdrawal, he also pays a 10% penalty, or $1,000. Outgoing personality with the ability to develop relationships (i.e., "People Person") and a sincere desire to help others Fearless, positive attitude, and willingness to be accountable for results Organized, detail-oriented, and excellent time-management skills A desire for continuous learning B. B)I and IV. A)exempt from taxes D)I and III. Contributions to an IRA may be tax deductible, depending on the individual's earnings and participation in a company-sponsored qualified retirement plan. However, it does guarantee payments for life (mortality). D) None, because it is the proceeds from a life insurance company. D)A 10% penalty plus the payment of ordinary income tax on funds withdrawn in excess of the owner's basis. U.S. Securities and Exchange Commission. continues payments as long as one annuitant is alive. B) Life annuity with period certain Vaccine has decreased the incidence. the SEC. B) the client may vote for the board of directors or board of managers. If an investor has a fixed-annuity contract with an insurance company, which of the following risks is assumed by the investor? Table1. Question #29 of 48Question ID: 606831 When a partial withdrawal is made from an annuity, the earnings are considered to be taken out first for tax purposes (or LIFO). The value of an annuity unit varies from month to month according to the performance of the separate account in comparison to the assumed interest rate. A variable annuity is just a tax-deferred annuity in which you get to choose how the value of the annuity is invested. For an insurance company, mortality risk turns out unfavorably if: Transcribed image text: 6. D) I and IV. C) none of these. D) a minimum of 10 years of variable payments, followed by additional variable payments for life. B) The death benefit cannot ever be more than the guaranteed benefit. D)Variable annuity contract with a discussion regarding legislative risk, A VA with its investments in the separate account subject to market risk would not align with the customer's objective. D) I and III. D) I and IV Upon John's death during the accumulation period, Sue takes a lump-sum payment.