Universal variable life policies Variable annuities are designed to combat inflation risk. *Variable annuity contracts were devised to help investors keep pace with inflation. A) partially a tax-free return of capital and partially taxable. D)It cannot be determined until the April return is calculated. 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: Therefore, ordinary income taxes will apply to the entire $10,000. B) 0. C)number of accumulation units. 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. B)IRAs. The fixed payment that the annuitant receives loses purchasing power over time as a result of inflation. With variable annuities policyholders can choose from a number of investment opportunities. Final answer. B)100% taxable. B)4200. *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. However, they are protected by state guaranty associations in the event that the insurance company providing the product goes out of business. All of the following statements about variable annuities are true EXCEPT: B)each annuity unit's value varies with time, but the number of annuity units is fixed. are purchased primarily for their insurance features However, it does guarantee payments for life (mortality). No, annuities are not FDIC-insured as they are not bank products. Post navigation For example, when paying rent, the rent payment (PMT) C)municipal bonds. Question #40 of 48Question ID: 606800 Universal variable life policies A joint life with last survivor annuity: b. Life income riders are best suited for those who anticipate a lengthy retirement and are generally not yet retired when making the VA purchase. 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 . 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. A) I and II. A) A variable annuity D) accumulation shares. C)Mortality risk. Question #17 of 48Question ID: 606802 A) not suitable A) The fact that the annuity payment may increase or decrease. The holder of a variable annuity receives the largest monthly payments under which of the following payout options? The number of annuity units rises once annuitization begins. Clusters of vesicles in various stages. A variable annuity has two phases: an accumulation phase and a payout (annuitization) phase. B) with guaranteed minimum withdrawal benefits (GMWBs) the periodic payments can be monthly, quarterly or annually Explain what is meant by positive and negative Reference: 12.1.2 in the License Exam, Question #39 of 48Question ID: 721469 Suppose that 20%20 \%20% of their users are United States users who log on daily. B) variable annuities. B)FINRA. 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. c. The separate account provides for a guaranteed minimum return. None of the other investments listed here offer tax-deferred growth. B) single payment deferred annuity. D) tax free. During payout, distributions will fluctuate due to performance in the separate account. D) It cannot be determined until the April return is calculated. C) the yield is always higher than bond yields. A)2800. The number of accumulation units can rise during the accumulation period. must precede every sales presentation. Variable annuity salespeople must register with all of the following EXCEPT: D)II and III. C) value of underlying securities held in the separate account. the agent must be licensed in both insurance and securities. Distributed along a dermatome. A)number of annuity units. Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Claudia Bienias Gilbertson, Debra Gentene, Mark W Lehman, Eric W. Noreen, Peter C. Brewer, Ray H Garrison. When the annuitization option is selected, each payment represents both capital and earnings. An immediate annuity is designed to pay an income one time-period after the immediate annuity is bought. A)Joint tenants annuity. IBM Noida, Uttar Pradesh, India1 month agoBe among the first 25 applicantsSee who IBM has hired for this roleNo longer accepting applications. D)Joint and last survivor annuity. An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are. As the name implies, the investment performance of a variable annuity's portfolio (separate account) can vary, and the investor bears the risk of any potential decline in its value. This compensation may impact how and where listings appear. 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. A) mutual fund units. D) I and IV A trend is formed from non-repetitive actions of people. In March, the actual net return to the separate account was 8%. The accumulation unit's value is used to calculate the total value of the account. C) II and III. Immediate annuities purchase annuity units directly. The payout of an annuitized variable annuity account changes from month to month in a manner determined by which of the following? A variable annuity is both an insurance and a securities product. It's somewhat similar to a variable life insurance policy in that: You can choose how the product's value is invested. Question #28 of 48Question ID: 606821 A)contact the issuer of the clients existing VA contract to facilitate the clients surrender of the contract. Question #37 of 48Question ID: 606817 B)suitable regardless of funding sources Once the cost basis is reached, any further withdrawals are a nontaxable return of principal. 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. *This annuity is nonqualified, which means the client has paid for it with after-tax dollars and has a basis equal to the original $29,000 investment. 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. A security is any investment for profit with management performed by a third party. The remainder of the premium is invested in the separate account. C) II and III. How to Rollover a Variable Annuity Into an IRA. *Mortality risk- If an annuitant lives longer than expected, the insurance company will have to continue payments longer than expected. A) II and III. B) the number of annuity units is fixed, and their value remains fixed. If the client, who is in a 30% tax bracket, makes a random withdrawal of $15,000, what will the tax liability to the IRS be? C) II and IV Practice all cards. When a variable annuity contract is annuitized, the number of annuity units is fixed. Your customer in his early 30s has received a modest inheritance from a relative. Reference: 12.3.3 in the License Exam. Deferred Annuity Definition, Types, How They Work, What Is a Fixed Annuity? continues payments only as long as all annuitants are still alive. An annuity is an agreement for one person or organization to pay another a series of payments. B)a majority vote from the shareholders is required to change the investment objectives. Policyholders . How is the distribution taxed? C) be returned to the separate account. Question #36 of 48Question ID: 606805 A) 4000. If the annuitant should die during that time, any death benefit would be paid to a beneficiary designated by the annuitant at the time the annuity was purchased. The most popular type of variable annuity is a deferred annuity. B)I and IV. A joint life with last survivor contract covers multiple annuitants and ceases payments at the death of the last surviving annuitant. Annuities: How to Find the Right One for You, How a Fixed Annuity Works After Retirement, Pros and Cons of Indexed Universal Life Insurance. a) What percentage of Facebook's users are from the United States? b) What probability is the 20%20 \%20% mentioned above? a variable annuity guarantees an earnings rate of return. Any withdrawals you make prior to the age of 59 may also be subject to a 10% tax penalty. B) Municipal bonds. III) A hierarchy of corporate staff evaluates divisions' plans and performance. Reference: 12.1.4 in the License Exam. B) Exchange traded Funds (ETFs) or Exchange traded Notes (ETNs) A) complete all paper work to purchase the annuity contract and obtain the clients signature immediately. The value of the separate account is now $30,000. *When money is deposited into the annuity, it is purchasing accumulation units. C) IRAs. D) a minimum of 10 years of variable payments, followed by additional variable payments for life. C)with guaranteed minimum withdrawal benefits (GMWBs) the periodic payments can be monthly, quarterly or annually Reference: 12.1.2 in the License Exam, Question #21 of 48Question ID: 606812 If at all you go deeper, then you will find a wide range of annuity products from a variety of companies. A) a variable annuity contract will provide a fluctuating monthly check upon the annuitization of the contract The money paid in will be returned tax free, but the earnings portion will be taxed as ordinary income. A registered representative explaining variable annuities to a customer would be CORRECT in stating that: U.S. Securities and Exchange Commission. a variable annuity guarantees payments for life. approve changes in the plan portfolio. *Contributions to a nonqualified annuity are made with the owner's after-tax dollars. A universal variable life policy should be purchased primarily for its insurance features, not its investment features. C) a variable annuity contract does not guarantee any type of return Carefully look at your options when choosing an annuity. D) A 10% penalty plus the payment of ordinary income tax on funds withdrawn in excess of the owner's basis. The upside was the possibility of higher returns during the accumulation phase and a larger income during the payout phase. Reference: 12.2.1 in the License Exam. Refinancing a home to draw out equity has been identified by FINRA as an abusive sales tactic regarding the sales of VAs. A) I and II The time period depends on how often the income is to be paid. B)Variable annuities. Contributions to a nonqualified annuity are made with the owner's after-tax dollars. For an insurance company, mortality risk turns out unfavorably if: A variable annuity is a tax-deferred retirement vehicle that allows you to choose from a selection of investments and then pays you a level of income in retirement that is determined by the performance of the investments you choose. have investment risk that is assumed by the investor Before the contract is annuitized, your client, currently age 60, withdraws some funds for personal purposes. withdraw funds without any tax consequences. On any device & OS. These include white papers, government data, original reporting, and interviews with industry experts. VAs, blue chip mutual fund portfolios, ETFs and ETNs are all tied to market performance in some way and have risk characteristics that would not align in terms of suitability for this client. If the customer takes a withdrawal of $10,000, what are the tax consequences? *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. 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. D) The fact that periodic payments into the contract may increase or decrease. Reference: 12.3.3 in the License Exam. An individual retirement annuity is an investment vehiclesimilar to an individual retirement accountthat is offered by insurance companies. 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. They offer broad diversification in the securities market and potential growth, all while using the power of tax deferral. If the annuitant should die during that time, any death benefit would be paid to a beneficiary designated by the annuitant at the time the annuity was purchased. C)the number of annuity units is fixed, and their value remains fixed. C) insurance guarantee. Since , has paid out quarterly dividends ranging from $0.00 to $0.00 per share. The beneficiary is taxed at ordinary income rates during the year the lump sum is received. B) I and III. During the . B) I and III. The remainder of the premium is invested in the separate account. \end{array} If your customer invests in a variable annuity and chooses to annuitize at age 65, which of the following statements are TRUE? Her agent recommended she choose a variable annuity as a safe haven for the funds. Over the past five years, 's dividend yield has averaged % per year. Question #20 of 48Question ID: 606808 When may a variable annuity account be surrendered? A)II and IV. B) the client may vote for the board of directors or board of managers. Investopedia does not include all offers available in the marketplace. D)I and II. C)III and IV. D) Growth mutual funds. Of the four client profiles below which might be the best suited for a variable annuity recommendation? C) III and IV. Contributions to an IRA may be tax deductible, depending on the individual's earnings and participation in a company-sponsored qualified retirement plan. Fixed income instruments, like bonds and fixed annuities, are subject to purchasing power risk. 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. C) II and IV. The number of annuity units varies. What Are the Risks of Annuities in a Recession? The $30,000 contract value represents $10,000 of contributions and $20,000 of earnings. The income was deferred from tax over the plan's life, so it is taxable as ordinary income once distributed. 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. C) insurance companies keep variable annuity funds in separate accounts from other insurance products. II) It has an internal capital market wherein each division competes for funds. C)The entire $10,000 is taxable as ordinary income. 10.1 This chapter addresses a number of ABS statistics relating to the economically active population which were not discussed elsewhere. Once a customer annuitizes a variable annuity, which of the following statements are TRUE? Your 65-year-old client owns a nonqualified variable annuity. A) Any tax due is deferred. A) the investment portfolio is managed professionally. A 10% penalty applies only if distributions begin before age 59-. 8 annuities provide a guaranteed rate of return, whereas annuities provide conservative to aggressive investments whose rates of return are not guaranteed. In addition, if the customer is not at least 59-, there will be a tax penalty of an additional 10%. B) the safety of the principal invested. must provide full and fair disclosure. "Variable Annuities: What You Should Know," Page 10. The separate account performance compared to an assumed interest rate. Changes in payments on a variable annuity correspond most closely to fluctuations in the: The company's well-known Rock symbol is an icon of strength, stability, expertise and innovation that has stood the test of time. A 32-year-old with a company-sponsored 401k plan who will need a lump sum soon to finance graduate school tuition Question #46 of 48Question ID: 606796 What percentile is represented by $710? D)an accounting measure used to determine payments to the owner of the variable annuity. All of the following are true about annuities EXCEPT: they have all the same characteristics as life insurance. D) an accounting measure used to determine the contract owner's interest in the separate account. 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 . C)II and III. This recommendation is: D) unsuitable because her situation exposes her to surrender charges and early withdrawal penalties in exchange for insufficient benefits. A)the state banking commission. C) none of these. 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. A) Life-only annuity Which of the following are defined as securities? Designed to protect against inflation. He earned the Chartered Financial Consultant designation for advanced financial planning, the Chartered Life Underwriter designation for advanced insurance specialization, the Accredited Financial Counselor for Financial Counseling and both the Retirement Income Certified Professional, and Certified Retirement Counselor designations for advance retirement planning. 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. Variable annuities should be considered long-term investments due to the limitations on withdrawals. A 45-year-old investor takes a lump-sum distribution from a nonqualified variable annuity. a variable annuity does not guarantee payments for life. Once annuitized, the number of annuity units does not vary. Though there is no beneficiary designation during the annuitization, this is not an issue for this annuitant. Instructions\textsf{\textcolor{#4257b2}{Instructions}}Instructions The following changes have been incorporated into Special Publication 800145, as of the date indicated - . Question #33 of 48Question ID: 606832 The money paid in will be returned tax free, but the earnings portion will be taxed as ordinary income. *The most important consideration in purchasing a variable annuity is to be aware that benefit payments will fluctuate with the investment performance of the separate account. This guideline has been prepared for use by Federal agencies. A customer has contributed $1,000 a year for 10 years to his tax-deferred nonqualified variable annuity. 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 C)earnings only and taxable is required by the Securities Act of 1933. The annuitant may not contribute and withdraw simultaneously. A 1 The applicant and possibly the agent initial any changes made. Which 2 of the 4 client profiles would a VA be LEAST suitable for? Indexed annuity owners receive credited interest tied to the fluctuations of the linked index An immediate annuity consists of a single premium An immediate annuity has a single premium. 111. In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. B)Fixed annuity contract with a discussion regarding timing risk D) I and IV. can be sold by someone with only an insurance license do not have a separate account Of the answer choices given the best would be to reevaluate the recommendation based on the new information tendered by the client. An 18-year-old, unmarried high school student sought a safe investment for a $30,000 bequest until after she graduated from college. A) defined contribution plans. A registered representative explaining variable annuities to a customer would be CORRECT in stating that: Annuity units are units of ownership when the contract is in the payout stage. Question #16 of 48Question ID: 606807 C) Age 40, currently unemployed B) fixed payments for 10 years, followed by variable payments for life. A) variable payments for 10 years, followed by fixed payments for life. A) Ordinary income tax on earnings exceeding basis. Among annuities, variable annuities differ from fixed annuities, which provide a specific and guaranteed return. C) Mutual fund portfolio consisting of blue chip stocks A variable annuity is a long term investment issued by an insurance company that can help you grow your money, take income in retirement and pass on your wealth. 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. B)I and III. A)accumulation shares. The number of annuity units is fixed. C) Tax-free municipal bonds PGIM Fixed Income, a division of PGIM Inc., an SEC-registered investment adviser and a business unit of Prudential Financial, Inc. is seeking a Portfolio Risk Surveillance Analyst. D) II and IV. Reference: 12.1.1 in the License Exam. What is her total tax liability? B) IPO. A) Age 56, available cash to invest, makes the maximum retirement plan contributions to an existing IRA and 401(k) plan When the second party dies, all payments cease. The number of accumulation units can rise during the accumulation period. Future annuity payments will vary according to the separate account's performance. A) a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero A) Age 56, available cash to invest, makes the maximum retirement plan contributions to an existing IRA and 401(k) plan Spartan Technology Services and Solutions Private Limited is a subsidiary of IBM (International Business Machines) Corporation. A) Capital gains taxation on the earnings withdrawn in excess of the owner's basis. An investor who has purchased a nonqualified variable annuity has the right to: Based on this information the RR should: 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. B)reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. In deciding whether to put money into a variable annuity versus some other type of investment, its worth weighing these pros and cons. Round to the nearest hundredth of a percentile. 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. Similarly, CDs are insured, thereby eliminating risk and guaranteeing a return. Fixed annuities typically earn at a lower, stable rate. A)each annuity unit's value and the number of annuity units vary with time. D)A variable annuity, Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. The payout compared to last month's payout. C)A 10% penalty plus the payment of ordinary income tax on all of the funds withdrawn. No paper. They are also not considered suitable for anyone who anticipates needing a lump sum within a short time frame to fund other endeavors. All of the following statements about variable annuities are true EXCEPT: Immediate life annuity. D) Capital gains tax on earnings exceeding basis. C)II and IV. B)fixed in value until the holder retires. \hspace{7pt} a. December 303030, to record the payroll. *Once a variable annuity is annuitized, the accumulation units are converted into a fixed number of annuity units. Life income riders are best suited for those who anticipate a lengthy retirement and are generally not yet retired when making the VA purchase. With regard to a variable annuity, all of the following may vary EXCEPT: Which of the following statements regarding variable annuities are TRUE? All of the following characteristics are shared by both a mutual fund and a variable annuity's separate account EXCEPT: Immediate life annuity with 10-year period certain. *Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. Which of the following statements regarding variable annuities are TRUE? *The minimum guaranteed death benefit is provided by that portion of the payment invested in the insurance company's general account. D) Life annuity with 10-year period certain. The return on a variable annuity is not guaranteed; it is determined by the underlying portfolio's value. Question #13 of 48Question ID: 606822 Because common stocks are not fixed dollar investments, they have the opportunity to keep pace with inflation. Question #24 of 48Question ID: 606806 Question #45 of 48Question ID: 606795 Can I Borrow from My Annuity for a House Down Payment?

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