variable An immediate annuity consists of a Single Premium T has an annuity that guarantees an income payment for the rest of his life. *Variable annuity contracts must be sold by prospectus due to the characterization of the separate accounts as securities, which must be registered under the Securities Act of 1933 and the Investment Company Act of 1940. A variable annuity is just a tax-deferred annuity in which you get to choose how the value of the annuity is invested. An accumulation unit in a variable annuity contract is: A)an accounting measure used to determine the contract owner's interest in the separate account. A) Age 56, available cash to invest, makes the maximum retirement plan contributions to an existing IRA and 401(k) plan Each of the remaining statements are true. When may a variable annuity account be surrendered? An immediate annuity is designed to pay an income one time-period after the immediate annuity is bought. *Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. Universal variable life policies Annuity death benefits are generally paid in a lump sum. D) 100% tax deferred. Reference: 12.1.4.2 in the License Exam. Complete a blank sample electronically to save yourself time and money. The payout compared to the initial payout upon annuitization. Reference: 12.1.2 in the License Exam. 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. The AG49-A Revisions a variable annuity does not guarantee an earnings rate of return. Question #13 of 48Question ID: 606822 This chapter was updated on 15 December, 2005. Reference: 12.1.1 in the License Exam. C) early annuity phase-in must be filed with FINRA. Question #28 of 48Question ID: 606821 An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are. However, the web version (cat. The number of annuity units varies. A) Capital gains taxation on the earnings withdrawn in excess of the owner's basis. Annuities: How to Find the Right One for You, How a Fixed Annuity Works After Retirement, Pros and Cons of Indexed Universal Life Insurance. Her intent was to use the funds for the down payment on a house after graduation. A)II and IV. The tax on this is $2,800 ($10,000 x 28%). C)3800. B)100% taxable. Of the total payroll for the last week of the year, $30,000\$30,000$30,000 is subject to unemployment compensation taxes. A prospectus for a variable annuity contract: B) payment guarantee. 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. Based only on these facts, the variable annuity recommendation is How is the distribution taxed? B)unsuitable because her situation exposes her to surrender charges and early withdrawal penalties in exchange for insufficient benefits. For example, when paying rent, the rent payment (PMT) If the customer takes a withdrawal of $10,000, what are the tax consequences? Refinancing a home to draw out equity has been identified by FINRA as an abusive sales tactic regarding the sales of VAs. A)There is no tax as the withdrawal is considered return of capital. For this potential advantage, the investor, rather than the insurance company, assumes the investment risk. The investor purchased accumulation units. Before the contract is annuitized, your client, currently age 60, withdraws some funds for personal purposes. A client has purchased a nonqualified variable annuity from a commercial insurance company. Simple and general annuities problems with solutions Among annuities, variable annuities differ from fixed annuities, which provide a specific and guaranteed return. D) variable annuities may only be sold by registered representatives. PDF Variable Annuities: What You Should Know - SEC What type of annuity has a cash value that is based upon the performance of it's underlying investment funds? EEO IS THE LAW . Investopedia requires writers to use primary sources to support their work. D)I and III. Variable Annuity Features | Annuity Guys Options. The accumulation period of a variable annuity may continue for many years. Chapter 7: Annuities Flashcards | Quizlet D) Variable annuity. The downside was that the buyer was exposed to market risk, which could result in losses. For a retired person, which of the following investments would provide the greatest protection against inflation? The number of annuity units becomes fixed when the contract is annuitized; it is the value of each unit that fluctuates. \end{array} For example, if the income is monthly, the first payment comes one month after the immediate annuity is bought. C) taxed as ordinary income only to the extent of earnings. Listing tax-deferred growth as an objective for retirement income, which of the following investments is most suitable? They are more suitable for individuals who can fund the annuity with cash, want to supplement existing retirement benefits they have already funded, are comfortable with the market risk associated with a VA separate account portfolio and anticipate a long retirement. Classifying annuities There are many categories of annuities. Once the contract is annuitized, monthly payments to the customer are: For example, when paying rent, the rent payment (PMT) . No software installation. Insurance companies introduced the variable annuity as an opportunity to keep pace with inflation. Fixed Annuity: A fixed annuity is a type of annuity contract that allows for the accumulation of capital on a tax-deferred basis. Which of the following statements regarding variable annuities are TRUE? B) 0. A) The entire amount is taxed as ordinary income, because it is not life insurance. D) II and IV. The annuitized payments are viewed for tax purposes as D) I and IV. C) II and IV. If you die before the payout phase, your beneficiaries may receive a. A joint life with last survivor contract covers multiple annuitants and ceases payments at the death of the last surviving annuitant. \hspace{7pt} b. January 444, to record the employers payroll taxes on the payroll to be paid on January 444. *A variable annuity does not guarantee an earnings rate because earnings will depend on the performance of the separate account. MetLife offers a comprehensive benefits program, including healthcare benefits, life insurance, retirement benefits, parental leave, legal plan services and paid time off. D) II and III. Suggesting that loans or drawing equity from a home to fund VA contracts have also been targeted as abusive sales practices. Therefore, ordinary income taxes will apply to the entire $10,000. a life insurance holder dies sooner than expected. D) I and II. Changes in payments on a variable annuity correspond most closely to fluctuations in the: A) waiver of premium \hspace{7pt} b. December 303030, to record the employers payroll taxes on the payroll to be paid on December 313131. Shortening the Securities Transaction Settlement Cycle The amount of the purchase payments that go into the account may be less than you paid because fees were taken out of the purchase payments. The fixed annuities, indexed annuities, and variable annuities are some of the major types of annuities, of which one may find immediate annuities and deferred annuities. B)value of annuity units. He makes the following four statements, all of which are true EXCEPT e) Are From the United States and Log on every day independently? 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. The holder of a variable annuity receives the largest monthly payments under which of the following payout options? B) I and II. What Are Ordinary Annuities, and How Do They Work (With Example)? All of the following are characteristics of a variable annuity, except: a. *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. D)accumulation units. C)Corporate bonds. They are also not considered suitable for anyone who anticipates needing a lump sum within a short time frame to fund other endeavors. Unit 12: Variable Annuities Flashcards | Chegg.com D) Variable annuity. 6102..55.001) is being updated on an ongoing basis. 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. A) I and II This cloud model is composed of five essential characteristics, three service models, and four deployment models. *VAs are less suitable for individuals who have not yet made maximum contributions to other retirement accounts such as IRAs and 401ks. Reference: 12.3.2.1 in the License Exam. D) each annuity unit's value varies with time, but the number of annuity units is fixed. When a variable annuity contract is annuitized, the number of annuity units is fixed. Variable annuity salespeople must be registered with FINRA and the state insurance department. *Insurance companies introduced the variable annuity as an opportunity to keep pace with inflation. D) cost of living. Once the contract is annuitized, monthly payments to the customer are: Question #29 of 48Question ID: 606831 A) periodic payment immediate annuity. *The minimum guaranteed death benefit is provided by that portion of the payment invested in the insurance company's general account. C)Mortality risk. C)prime rate. The number of variable annuity accumulation units can rise during the accumulation period when additional units are being purchased. Flashcards - Securities and Tax - FreezingBlue Fixed annuities pay a fixed monthly benefit which loses purchasing power if there is inflation. Variable Annuities. 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. \text{Salaries:} && \text{Deductions:}\\ A) a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero \hspace{10pt} \text{Warehouse salaries} & 110,000 & \hspace{10pt} \text{Social security tax withheld} & 51,714\\ 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: Her agent recommended she choose a variable annuity as a safe haven for the funds. B)changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. Question #31 of 48Question ID: 606836 Reference: 12.1.2.1.2 in the License Exam. Chapter 6-Classification Annuities Flashcards | Quizlet A registered representative recommends a variable annuity with an income rider to a client. Variable Annuities Flashcards - Cram.com Life with period certain will produce a smaller check for life because the insurance company will guarantee payments to a beneficiary for a certain period of time designated in the contract should the annuitant die within that period. Once the cost basis is reached, any further withdrawals are a nontaxable return of principal. You have 4 clients each expressing interest in a variable annuity contract. A registered representative's (RR) customer is speaking of a variable life insurance contract he owns. During the . Generally, a life-only contract pays the most per month because payments cease at the annuitant's death. There are two interest rates under fixed annuities. All of the following statements regarding variable annuities are true EXCEPT: A) variable annuities offer the investor protection against capital loss. A separate account will invest in a number of different securities. The client's investment objectives, tax bracket, investment experience and risk tolerance all align well with a VA recommendation. Often used for retirement planning purposes, it is meant to provide a regular (monthly, quarterly, annual) income stream, starting at some point in the future. an annuitant lives longer than expected. D) expense guarantee. 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 A)unsuitable because the return on something as conservative as a variable annuity tends to be low. *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 money paid in will be returned tax free, but the earnings portion will be taxed as ordinary income. must be filed with FINRA. He makes the following four statements, all of which are true EXCEPT III. A)contact the issuer of the clients existing VA contract to facilitate the clients surrender of the contract. A customer has an investment objective of keeping pace with inflation while assuming moderate risk. C)insurance companies keep variable annuity funds in separate accounts from other insurance products. The return on a variable annuity is not guaranteed; it is determined by the underlying portfolio's value. The work environment characteristics are normal office conditions. 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: 12.1.2.1.1 in the License Exam. D)I and IV. A joint life with last survivor annuity: B) payments continue until the death of the primary owner. 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. There is a guaranteed minimum interest rate, normally amounting to between 1 and 3 percent. D) Joint and last survivor annuity. a variable annuity guarantees an earnings rate of return. D) reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. C) Mutual fund portfolio consisting of blue chip stocks *The owner of a life annuity with 10-year period certain will receive payments for life, subject to a minimum of 10 years. A) I and IV. A) changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. b. C) I and III. A) Money market fund. D) III and IV. Because this is not guaranteed, the policyowner bears the investment risk. C) the client assumes the investment risk. However, at the end of the period certain the payments to the named beneficiary (the spouse) will stop. However, because the client is not yet age 59- when making the withdrawal, he also pays a 10% penalty, or $1,000. C) none of these. Reference: 12.3.3 in the License Exam. C) payments continue for a pre-determined period of time. She will receive the annuity's entire value in a lump-sum payment. B) life income A trend is formed from non-repetitive actions of people. The original investment has grown to a value of $60,000. *A periodic payment immediate annuity is a contradiction in terms. This factor is used to establish the dollar amount of the first annuity payment. 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. *Mortality risk- If an annuitant lives longer than expected, the insurance company will have to continue payments longer than expected. The correct answer was: partially a tax-free return of capital and partially taxable. B)mutual fund units. Reference: 12.1.2.1.1. in the License Exam. A)II and IV. Essential Characteristics: B)a minimum rate of return is guaranteed. \hspace{10pt} Social security, 6%6\%6% on first $100,000\$100,000$100,000 of employee annual earnings Reference: 12.1.4.1 in the License Exam. You can learn more about the standards we follow in producing accurate, unbiased content in our. B) II and III 2019 Ted Fund Donors A the safety of the principal invested B the yield is always higher than bond yields. A) a minimum rate of return is guaranteed. \hspace{7pt} a. December 303030, to record the payroll. The $30,000 contract value represents $10,000 of contributions and $20,000 of earnings. This would not align with the couple's criteria for coverage as long as they both live. vote for the investment adviser. D) Variable annuities. D)Joint and last survivor annuity. B) The policyowner. Question #18 of 48Question ID: 606827 A joint-and-last-survivor annuity is a payout option where: Which of the following is NOT an accurate statement concerning a variable life insurance contract? The earnings are taxable but the cost basis is returned tax free. \hspace{10pt} Federal unemployment (employer only), 0.8%0.8\%0.8%. All of the following statements regarding variable annuities are true EXCEPT: D)Investment risk. *During the payout period, payments are based on a fixed number of annuity units established when the contract was annuitized. is required by the Securities Act of 1933. Immediate life annuity with 10-year period certain. It was a lump-sum purchase. The value of the separate account is now $30,000. Which of the following recommendations would best meet the customer profile? Job Classification: Corporate - Legal and Compliance. When the contract is annuitized, the annuitant is credited with a fixed number of annuity units. III) A hierarchy of corporate staff evaluates divisions' plans and performance. D)the rate of return is determined by the underlying portfolio's value. are purchased primarily for their insurance features 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. Any withdrawals you make prior to the age of 59 may also be subject to a 10% tax penalty. Variable annuities involve underlying equity investments in a separate account. D) I and IV. Listing tax-deferred growth as an objective for retirement income, which of the following investments is most suitable? A 10% penalty applies only if distributions begin before age 59-. An individual retirement annuity is an investment vehiclesimilar to an individual retirement accountthat is offered by insurance companies. B) single payment deferred annuity. It is innate and universal. Prudential Retirement Security Annuity VI is a group variable annuity (GVA) issued by Prudential Retirement Insurance and Annuity Company (PRIAC) which utilizes a Separate Account offered C)with guaranteed minimum withdrawal benefits (GMWBs) the periodic payments can be monthly, quarterly or annually If an insurance holder dies sooner than expected, the insurance company will have to pay the death benefit sooner. A customer has contributed $1,000 a year for 10 years to his tax-deferred nonqualified variable annuity. The features of variable deferred annuities are many. Question #24 of 48Question ID: 606806 a) What percentage of Facebook's users are from the United States? 7 - Annuities Flashcards | Quizlet How Are Nonqualified Variable Annuities Taxed? D)money market funds. D) a variable annuity contract is subject to fluctuating values due to market fluctuations of the underlying separate accounts. *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. *The customer, in the accumulation stage of the annuity, is holding accumulation units. 8 annuities provide a guaranteed rate of return, whereas annuities provide conservative to aggressive investments whose rates of return are not guaranteed. b. Universal variable life policies D)II and III. A) mortality guarantee. Reference: 12.1.2.1.1 in the License Exam. 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. the state banking commission. For a nonqualified variable annuity, cost basis for the annuitant would use the after-tax dollars contributed. II) It has an internal capital market wherein each division competes for funds. When the contract is annuitized, the annuitant is credited with a fixed number of annuity units. a variable annuity guarantees an earnings rate of return. D)Variable annuity. B)I and III. As with most retirement account options, withdrawals before the age of 59 will result in a 10% tax penalty. These contracts cover both lives and will continue to make payments until the last spouse dies. On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity). 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. 111. A) I and III. D) minimum guaranteed death benefit. savingsbondsGroupinsurance$198,74451,71415,21030,42045,630$341,718, Tax rates assumed: C) II and III. 11.1: Fundamentals of Annuities - Mathematics LibreTexts Ideally they should be funded with readily available cash rather than using funds liquidated from existing investments. Chapter 12: Variable Annuities Flashcards | Quizlet B) II and IV. Withdrawals from a nonqualified variable annuity are made on a LIFO basis, so the taxable earnings are considered taken out before principal. A) Joint tenants annuity. D) 4500. *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. When money is deposited into the annuity, it is purchasing accumulation units. All of the following characteristics are shared by both a mutual fund and a variable annuity's separate account EXCEPT: Frequently Asked Questions Anti-Money Laundering Program and Suspicious B)Value of each annuity unit each month. A)exempt from taxes The accumulation unit's value is used to calculate the total value of the account. Question #38 of 48Question ID: 606798 Needs - are goal-directed forces that people experience. A variable annuity has two phases: an accumulation phase and a payout (annuitization) phase. A) I and III. Reference: 12.1.4 in the License Exam. The value of the annuity units varies. Typically, they allow one withdrawal each year during the accumulation phase. Question #15 of 48Question ID: 606804 Variable annuities provide protection from inflation because their monthly income can increase depending on the separate account's performance. A life with period certain contract guarantees payments for a specified number of years to a named beneficiary if the annuitant dies during that time. B) the client may vote for the board of directors or board of managers. A) number of annuity units. B)suitable regardless of funding sources A registered representative explaining variable annuities to a customer would be CORRECT in stating that: 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. Which of the following statements regarding variable annuities are TRUE? Question #46 of 48Question ID: 606796 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. Which of the following statements is not true about the characteristics of a trend? Distributed along a dermatome. B) a variable annuity contract is not required to be sold by prospectus because it is an insurance contract B) Municipal bonds. There is no clear answer to this. Nicks Enterprises has purchased a new machine tool that will allow the company to improve the efficiency of its operations. She may choose to receive monthly payments for the rest of her life. The investor has already paid tax on the contributions but the earnings have grown tax-deferred. C) each annuity unit's value and the number of annuity units vary with time. Deal with mathematic Math is all about solving equations and finding the right answer. LESSON 7: ANNUITIES - FIXED AND VARIABLE - course.uceusa.com B) II and III B)II and III. 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. A) Life-only annuity a variable annuity has which of the following characteristics A) variable payments for 10 years, followed by fixed payments for life. Designed to protect against inflation. $63,000 b.$51,000 c. $18,000 d.$6,000. The fixed payment that the annuitant receives loses purchasing power over time as a result of inflation. What Are the Risks of Annuities in a Recession? All of the following are true about annuities EXCEPT: they have all the same characteristics as life insurance. He makes several statements regarding the contract. An 18-year-old, unmarried high school student sought a safe investment for a $30,000 bequest until after she graduated from college. national origin, genetics, disability, age, veteran status, or any other characteristic protected by law. must precede every sales presentation. Financial Sales Professional Job in Fort Worth, TX at New York Life A) I and II Contributions to a nonqualified variable annuity are not tax deductible. B)Capital gains taxation on the earnings withdrawn in excess of the owner's basis. Question #32 of 48Question ID: 606815 Periodic payment deferred annuity. \hspace{10pt} State unemployment (employer only), 3.8%3.8\%3.8% A) each annuity unit's value is fixed, but the number of annuity units varies with time. Most annuities will not allow you to withdraw additional funds from the account once the payout phase has begun. D) A 10% penalty plus the payment of ordinary income tax on funds withdrawn in excess of the owner's basis. Once a variable annuity has been annuitized: Contributions to an IRA may be tax deductible, depending on the individual's earnings and participation in a company-sponsored qualified retirement plan.
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