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a variable annuity does not guarantee payments for life. D)suggest to the client that perhaps a loan or refinancing his vacation home might be a better way to fund the contract purchase. Reference: 12.1.1 in the License Exam. Of the four client profiles below which might be the best suited for a variable annuity recommendation? II. C) taxed as ordinary income only to the extent of earnings. Reference: 12.2.1 in the License Exam. B) payment guarantee. D) III and IV. Distributions from such an annuity are computed on a LIFO basis with the income taxed first. This includes transportation, food, lodging, and entertainment. The most suitable option and one considered effective for married couples is a single joint and last survivor contract. The separate account is NOT likely to invest in: An important basic characteristic of common stocks that makes them a suitable type of investment for the separate account of variable annuities is: Universal variable life policies All of the following are characteristics of Variable Annuity contracts EXCEPT The possibility of higher returns and greater income than fixed annuities, but there's also a risk that the account will fall in value A There are no surrender fees B Guaranteed death benefit C Tax deferred growth D Training Explanations A) mortality guarantee. B)Capital gains taxation on the earnings withdrawn in excess of the owner's basis. c) Construct a contingency table showing all the joint and marginal probabilities. For example, when paying rent, the rent payment (PMT) The Three Main Types of Annuity Insurance - Fixed, Variable, and Equity Therefore, variable annuities must be registered with the state insurance commission and the Securities and Exchange Commission. D)II and III. A) Money market fund. a) What percentage of Facebook's users are from the United States? Spartan Technology Services and Solutions Private Limited is a subsidiary of IBM (International Business Machines) Corporation. 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. B) II and III Variable annuities are designed to combat inflation risk. A) periodic payment immediate annuity. Diagnosis is made by punch biopsy. 2019 Ted Fund Donors 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. 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 Question #43 of 48Question ID: 606809 Determine whether the following events are independent or dependent. B) single payment deferred annuity. Once the cost basis is reached, any further withdrawals are a nontaxable return of principal. B) fixed in value until the holder retires. It may be used by nongovernmental . B) I and II. \hspace{10pt} \text{Office salaries} & \underline{234,000} & \hspace{10pt} \text{Medicare tax withheld} & 15,210\\ A) waiver of premium B) a variable annuity contract is not required to be sold by prospectus because it is an insurance contract *A variable annuity payout is determined by comparing account performance with AIR, and this month's payout with last month's payout. Which is it? When a variable annuity contract is annuitized, the number of annuity units is fixed. a variable annuity has which of the following characteristics With regard to a variable annuity, all of the following may vary EXCEPT: D) I and III. B) The death benefit cannot ever be more than the guaranteed benefit. The separate account is NOT likely to invest in: IBM Noida, Uttar Pradesh, India4 weeks agoBe among the first 25 applicantsSee who IBM has hired for this roleNo longer accepting applications. The number of annuity units is fixed at the time of annuitization. In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. The amount taxed is the amount of the lump-sum payment minus the deceased's cost basis in the investment. C) 3800. During payout, distributions will fluctuate due to performance in the separate account. There is a guaranteed minimum interest rate, normally amounting to between 1 and 3 percent. A) I and III. Similarly, CDs are insured, thereby eliminating risk and guaranteeing a return. The number of accumulation units is always fixed throughout the accumulation period. B)a majority vote from the shareholders is required to change the investment objectives. Question #32 of 48Question ID: 606815 He makes several statements regarding the contract. Unit 12: Variable Annuities Flashcards | Chegg.com continues payments as long as one annuitant is alive. He makes the following four statements, all of which are true EXCEPT The accumulation period of a variable annuity may continue for many years. To comply with Regulation SP, a brokerage firm is required to do all of the following EXCEPT: A) deliver an annual notice of its information collecting and sharing policies to all customers. One of the following would achieve that objective but a suitability discussion regarding it's risk should also occur. The money paid in will be returned tax free, but the earnings portion will be taxed as ordinary income. *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. D) Capital gains tax on earnings exceeding basis. The value of the annuity units varies. Suggesting that loans or drawing equity from a home to fund VA contracts have also been targeted as abusive sales practices. The features of variable deferred annuities are many. Universal variable life policies Uses in Investing, Pros, and Cons, Indexed Annuity: Definition, How It Works, Yields, and Caps. An investor who has purchased a nonqualified variable annuity has the right to: Variable annuities must be registered with: All of the following statements concerning a variable annuity are correct EXCEPT: D) variable annuities will protect an investor against capital loss. C) III and IV D)It cannot be determined until the April return is calculated. A customer has contributed $1,000 a year for 10 years to his tax-deferred nonqualified variable annuity. This would not align with the couple's criteria for coverage as long as they both live. DR:BASSANT ADEL 9 QUIZ CH 6 Choose the correct answer: 1-Insurance policy benefits are classified on an insurance company's balance sheet as A. liabilities, because the insurance company may have to pay out the benefits B. assets, because policy benefits are valuable to the company C. liabilities, because customers may fall behind on their premium payments D. assets, because policy benefits . Variable annuities involve underlying equity investments in a separate account. In this case, the investor is taking a lump-sum distribution before reaching age 59- and must pay an additional 10% penalty on the taxable amount. Reference: 12.1.4 in the License Exam. C)annuity units. The number of annuity units varies. As with all tax-deferred accounts, municipal bonds are not appropriate investments because interest earned on municipals is already tax exempt at the federal level. B) payments continue until the death of the primary owner. D)value of accumulation units. What Are the Biggest Disadvantages of Annuities? the SEC. A) changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. 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. Designed to protect against inflation. Distributed along a dermatome. The accumulation unit's value is used to calculate the total value of the account. B)value of annuity units. Your client owns a variable annuity contract with an AIR of 4%. If an investor has purchased an immediate variable annuity, which of the following statements best describe the investment? B) II and IV. D) payments continue until age 70-. An annuity is an agreement for one person or organization to pay another a series of payments. Based on this information the RR should: Reference: 12.2.1 in the License Exam. Contributions to a nonqualified variable annuity are not tax deductible. An important basic characteristic of common stocks that makes them a suitable type of investment for the separate account of variable annuities is: 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: C) such an annuity is designed to combat inflation risk. You can buy an annuity with either a lump sum or a series of payments, and the accounts value will grow accordingly. What are the characteristics of fixed annuities? - InsuranceQnA 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. The return on a variable annuity is not guaranteed; it is determined by the underlying portfolio's value. 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. 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. Therefore only a fixed annuity could be considered as suitable. Classifying annuities There are many categories of annuities. *During the accumulation phase, the number of accumulation units will increase as additional money is invested. C) early annuity phase-in Reference: 12.3.4 in the License Exam. Is F&G Annuities & Life Inc (FG) a Good Dividend Stock? | AAII The number of accumulation units can rise during the accumulation period. All of the following statements about variable annuities are true EXCEPT: This guideline has been prepared for use by Federal agencies. B)mutual fund units. D) I and IV A)an accounting measure used to determine the contract owner's interest in the separate account. An investor who has purchased a nonqualified variable annuity has the right to: The $30,000 contract value represents $10,000 of contributions and $20,000 of earnings. Variable Annuity Features | Annuity Guys What Are the Risks of Annuities in a Recession? A) Fixed annuities. IV. A) mortality guarantee. B)I and IV. D) a minimum of 10 years of variable payments, followed by additional variable payments for life. Over the following year, the stock fund has a 10% return, and the bond fund has a 5% return. When the annuitization option is selected, each payment represents both capital and earnings. C) the yield is always higher than bond yields. All of the following statements regarding variable annuities are true EXCEPT: A)a lifetime withdrawal benefit (LWB) or lifetime income benefit is generally in the form of a rider attached to the contract which will come at a cost to the annuitant Post navigation The earnings on dollars invested into a variable annuity accumulate tax deferred, which is why variable annuities are popular products for retirement accumulation. B) The entire $10,000 is taxable as ordinary income. Financial Sales Professional Job in Fort Worth, TX at New York Life However, because the client is not yet age 59- when making the withdrawal, he also pays a 10% penalty, or $1,000. C)suitable due to the death benefit features of a variable annuity. B)II and III. Can I Borrow from My Annuity for a House Down Payment? Accumulation Period of Fixed Annuities During this period, premiums are credited with interest which accumulates on a yearly basis. A customer has a nonqualified variable annuity. There are two elements that contribute to the value of a variable annuity: the principal, which is the amount of money you pay into the annuity, and the returns that your annuitys underlying investments deliver on that principal over the course of time. Options. A) Fixed Annuity A) a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero A) Life-only annuity B)reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. With variable annuities policyholders can choose from a number of investment opportunities. The number of accumulation units can rise during the accumulation period. approve changes in the plan portfolio. must provide full and fair disclosure. Reference: 12.1.4.1 in the License Exam. D) Any time before the accumulation period. That can adversely affect your returns over the long term, compared with other types of investments. If in the following year, the S&P 500 declined by 5%, the annuities value would remain at $107,000 because gains are locked in each year. A) II and III. B)It will be lower. D)Variable annuity. 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. C)Mortality risk. If the contract holder dies before the period expires, the remaining payments are made to the beneficiary. As part of his profile he stresses that he has had uncomfortable experiences in the past with the stock market and is not inclined to invest in anything that is based on stock market performance and would opt for principal protection instead. The second phase is triggered when the annuity owner asks the insurer to start the flow of income, often referred to as the payout phase. 8 annuities provide a guaranteed rate of return, whereas annuities provide conservative to aggressive investments whose rates of return are not guaranteed. An immediate annuity is designed to pay an income one time-period after the immediate annuity is bought. B)fixed in value until the holder retires. A)equity funds. Ideally they should be funded with readily available cash rather than using funds liquidated from existing investments. B) variable annuities. A joint life with last survivor contract covers multiple annuitants and ceases payments at the death of the last surviving annuitant. When a variable contract is annuitized (distributed in regular payments, not as a lump sum), the number of accumulation units is multiplied by the unit value to arrive at the account's current value. EEO IS THE LAW . Immediate life annuity. Most annuities will not allow you to withdraw additional funds from the account once the payout phase has begun. This cloud model is composed of five essential characteristics, three service models, and four deployment models. In addition, if the customer is not at least 59-, there will be a tax penalty of an additional 10%. C) The insurance company. Therefore, ordinary income taxes will apply to the entire $10,000. If your client, who is in the 28% tax bracket, makes a lump-sum withdrawal of $15,000, what tax liability results from the withdrawal? Reference: 12.3.2.4 in the License Exam. D) each annuity unit's value varies with time, but the number of annuity units is fixed. The number of annuity units rises once annuitization begins. A)defined contribution plans. D) I and IV. The nature of the securities invested in-bonds and growth stocks-makes it necessary that sales representatives and their principals be licensed in securities as well as insurance. Since the client is older than 59 at the time of distribution, the additional 10% penalty tax is not incurred. covers more than one person. A customer is receiving annuitized payments from a variable annuity. The beneficiary is taxed at ordinary income rates during the year the lump sum is received. The original investment has grown to a value of $60,000. All of the following investment strategies offer either fully or partially tax-deductible contributions to individuals who meet eligibility requirements EXCEPT: Spartan Technology Services and Solutions Private Limited is a subsidiary of IBM (International Business Machines) Corporation. When the annuitization option is selected, each payment represents both capital and earnings. 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. Senior Customer Care Advocate Annuities ($22 per hour) in Warwick D)money market funds. The investor has already paid tax on the contributions but the earnings have grown tax-deferred. The correct answer was: partially a tax-free return of capital and partially taxable. Based on the information given in the question, the VA recommendation would not be suitable. C) with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed (The exception is the fixed income annuity, which has a moderate to high payout that rises as the annuitant ages). A 32-year-old with a company-sponsored 401k plan who will need a lump sum soon to finance graduate school tuition C) 100% tax free. A variable annuity is a security and must be registered with the SEC, not FINRA. During the payout period, payments are based on a fixed number of annuity units established when the contract was annuitized. A) II and III. A) Capital gains taxation on the earnings withdrawn in excess of the owner's basis. All of the following are characteristics of a variable annuity, except: a. Round to the nearest hundredth of a percentile. A)the state banking commission. During the . The investor has already paid tax on the contributions but the earnings have grown tax-deferred. The investor purchased accumulation units. If the contract holder dies before the period expires, the remaining payments are made to the beneficiary. In the case of deferred annuities, this is often referred to as the accumulation phase. \hspace{10pt} \text{Warehouse salaries} & 110,000 & \hspace{10pt} \text{Social security tax withheld} & 51,714\\ It is the starting point of motivation because they generate emotions. Among annuities, variable annuities differ from fixed annuities, which provide a specific and guaranteed return. There is no clear answer to this. B) During the accumulation period. Francisco R. - Financial Professional - Prudential Financial | LinkedIn D)II and III. D) II and IV. *If the separate account of a variable annuity with an AIR of 4% had actual net earnings of 8% in March, the April payment will be higher than the March payment. Get the free Learn About Annuities and Their Myths - F&G C) II and III. A variable annuity's separate account is: A separate account will invest in a number of different securities. No, annuities are not FDIC-insured as they are not bank products. An annuity may be purchased under all of the following methods EXCEPT: D) the payout plans provide the client income for life. Consequently, the client pays taxes only on the growth portion of the withdrawal ($10,000). Future annuity payments will vary according to the separate account's performance. A)2800. *Since this is a nonqualified annuity (with no tax deduction), the client pays taxes only on the growth portion or, in this case, $10,000. B)Value of each annuity unit each month. An investor owning which of the following variable annuity contracts would hold accumulation units? If a 42-year-old customer has been depositing money in a variable annuity for 5 years, and he plans to stop investing but has no intention of withdrawing any funds for at least 20 years, he is holding: order now. While there is no guarantee on how investments in the separate account will perform, depending on its investment performance, the separate account could provide for a larger death benefit than the minimum guaranteed amount. A)II and IV. A)each annuity unit's value and the number of annuity units vary with time. Reference: 12.3.1 in the License Exam, Question #30 of 48Question ID: 606833 B)I and III. Question #24 of 48Question ID: 606806 B) II and III B) The policyowner. $63,000 b.$51,000 c. $18,000 d.$6,000. A prospectus for a variable annuity contract: D) the yield is always higher than mortgage yields. What are the different types of annuities? | III A)exempt from taxes When the second party dies, all payments cease. D)suitable due to the relative safety of the investment. A 10% penalty applies only if distributions begin before age 59-. &&& \underline{\underline{\$341,718}} C) single payment immediate annuity. 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 joint life with last survivor annuity: *Variable annuity contracts were devised to help investors keep pace with inflation. C) a variable annuity contract does not guarantee any type of return A)100% tax free. D) Growth mutual funds. C. John is the annuitant in a variable plan, and Sue is the beneficiary. Question #41 of 48Question ID: 606801 \hspace{10pt} State unemployment (employer only), 3.8%3.8\%3.8% B) The death benefit cannot ever be more than the guaranteed benefit. A fixed annuity is an insurance contract that pays a guaranteed rate of interest on the owner's contributions and later provides a guaranteed income. Who assumes the investment risk in a variable annuity contract? Do homework Doing homework can help you learn and understand the material covered in class. The following are the characteristics or the hierarchy of a trend except A. Gigatrends C. Megatrends B. Macrotrends D. Nanotrends _____11. She may choose to receive monthly payments for the rest of her life. A registered representative recommends a variable annuity with an income rider to a client. A)III and IV. Single payment deferred annuity. D)I and III. With a fixed annuity, by contrast, the insurance company assumes the risk of delivering whatever return it has promised. variable annuity without paying tax at the time of the transfer. Guaranteed Lifetime Annuity: How They Work, When They Pay You, This is also generally true of retirement plans. C)the invested money will be professionally managed according to the issuers' investment objectives. A) It will be higher. 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. Your client has $50,000 to invest. 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. No paper. Annuities are similar to other forms of investing in that the owner invests money with the hope that it will gain in value, but annuities also come with higher fees than most mutual funds. A. Reference: 12.1.2.1.1 in the License Exam. Contributions to an IRA may be tax deductible, depending on the individual's earnings and participation in a company-sponsored qualified retirement plan. Given that all of the current retirement investments are subject to market risk, the customer wants these new funds to have no market risk exposure. Suggesting that loans or drawing equity from a home to fund VA contracts have also been targeted as abusive sales practices. Question #29 of 48Question ID: 606831 A registered representative recommends a variable annuity with an income rider to a client. Question #20 of 48Question ID: 606808 How is the distribution taxed? C)municipal bonds. Which of the following recommendations would best meet the customer profile? B)cost of living. C)II and IV. Upon John's death during the accumulation period, Sue takes a lump-sum payment. C) be returned to the separate account. Reference: 12.1.4.1 in the License Exam. An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are. An investor who purchases a fixed annuity contract assumes purchasing-power risk. C) Universal variable life policy. C)prime rate. B)Tax-free municipal bonds C) II and IV. All of the following investment strategies offer either fully or partially tax-deductible contributions to individuals who meet eligibility requirements EXCEPT: C)III and IV. B)Variable annuities. How Variable Life Insurance Works: Pros and Cons - ValuePenguin B) Life annuity. A trend makes considerable influence or impact. have investment risk that is assumed by the investor 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. This role is also eligible for annual short-term incentive compensation. You purchase a variable annuity contract by making either a single purchase payment or a series of purchase payments. Following the transition to T+1 in the U.S. markets, Commission staff will continue to work with industry leaders, public interest advocates, investors and other regulators to assess the future feasibility of a T+0 settlement standard cycle, and seek to identify ways to overcome the challenges associated with such a move, as articulated in the . D) expense guarantee. 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. All of the following characteristics are shared by both a mutual fund and a variable annuity's separate account EXCEPT: D) periodic payment deferred annuity. \end{array} Both products typically have a wide range of options across equities, bonds and money market instruments. A variable annuity is a contract between you and an insurance company, under which the insurer agrees to make periodic pay- ments to you, beginning either immediately or at some future date. The fees on variable annuities can be quite hefty. A 58-year-old individual near retirement who is in good health and anticipates a lengthy retirement A)Fixed annuities. When the second party dies, all payments cease. A)variable annuities will protect an investor against capital loss. He originally invested $29,000 4 years ago; it now has a value of $39,000. A customer, who has contributed to an IRA and to an employer matching 401(k) plan continuously for many years, wants to purchase an annuity contract to add additional monthly income once retired. Fixed annuities. Suppose that 20%20 \%20% of their users are United States users who log on daily. "Variable Annuities: What You Should Know," Page 6. The number of variable annuity accumulation units can rise during the accumulation period when additional units are being purchased. Once the cost basis is reached, any further withdrawals are a nontaxable return of principal. However, it does guarantee payments for life (mortality). The upside was the possibility of higher returns during the accumulation phase and a larger income during the payout phase. Which of the following recommendations would best meet the customer profile? Reference: 12.1.2 in the License Exam. \hspace{7pt} b. January 444, to record the employers payroll taxes on the payroll to be paid on January 444. Variable annuities are designed to combat inflation risk. What is the taxable consequence of this withdrawal to your client? Your customer, still working, informs you that she will be funding a variable annuity you have recommended from 2 sources: a refinancing of her primary home where she will be able to draw out equity that has built up since it was purchased 15 years ago, and cashing out another variable annuity that she recently purchased within the past 2 years without a lifetime income rider like the one you have recommended. 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. C) The investor's concerns about taxes. 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.