B) taxed as ordinary income. Of the answer choices given the best would be to reevaluate the recommendation based on the new information tendered by the client. B) During the accumulation period. B)4200. Variable annuity salespeople must register with all of the following EXCEPT: Which of the following are defined as securities? D) None, because it is the proceeds from a life insurance company. Though there is no beneficiary designation during the annuitization, this is not an issue for this annuitant. A universal variable life policy should be purchased primarily for its insurance features, not its investment features. She may choose to receive monthly payments for the rest of her life. 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. A)equity funds. A guaranteed lifetime annuity promises to pay the owner an income for the rest of their life. Of the four client profiles below which might be the best suited for a variable annuity recommendation? Reference: 12.3.1 in the License Exam. The correct answer was: partially a tax-free return of capital and partially taxable. *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. covers more than one person. Which of the following is not characteristic of a fixed annuity? B) the number of annuity units is fixed, and their value remains fixed. A) Ordinary income tax on earnings exceeding basis. 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. Reference: 12.2.1 in the License Exam. *Only variable annuities have payout plans that provide the client income for life. A customer has contributed $1,000 a year for 10 years to his tax-deferred nonqualified variable annuity. The number of annuity units varies. Income that cannot be outlived by the owner C) value of underlying securities held in the separate account. D) variable annuities may only be sold by registered representatives. *A joint life with last survivor contract covers multiple annuitants and ceases payments at the death of the last surviving annuitant. The holder of a variable annuity receives the largest monthly payments under which of the following payout options? *VAs are less suitable for individuals who have not yet made maximum contributions to other retirement accounts such as IRAs and 401ks. Reference: 12.1.4.1 in the License Exam. Question #47 of 48Question ID: 606813 As part of the registration requirements, a prospectus must be filed and distributed to prospective investors. Investopedia requires writers to use primary sources to support their work. a. Premiums made into the annuity purchase accumulation units. Portfolio Compliance Risk Analyst Job in Newark, NJ at Prudential A registered representative's (RR) customer is speaking of a variable life insurance contract he owns. C) III and IV. The client's investment objectives, tax bracket, investment experience and risk tolerance all align well with a VA recommendation. The amount taxed is the amount of the lump-sum payment minus the deceased's cost basis in the investment. D)suitable due to the relative safety of the investment. D) Growth mutual funds. When money is deposited into the annuity, it is purchasing accumulation units. B) allow customers to opt out of sharing of financial information with certain nonaffiliated firms. D)II and III. *A variable annuity does not guarantee an earnings rate because earnings will depend on the performance of the separate account. D) I and II. Variable Annuity Advantages and Disadvantages, Guide to Annuities: What They Are, Types, and How They Work. D) a minimum of 10 years of variable payments, followed by additional variable payments for life. D) Capital gains tax on earnings exceeding basis. Instructions\textsf{\textcolor{#4257b2}{Instructions}}Instructions No, annuities are not FDIC-insured as they are not bank products. IBM hiring Practitioner- Policy Admin in Noida, Uttar Pradesh, India d) What is the probability that a user is from the United States, given that he or she logs on every day? An immediate annuity is designed to pay an income one time-period after the immediate annuity is bought. A) two people are covered and payments continue until the second death. A trend is formed from non-repetitive actions of people. The time period depends on how often the income is to be paid. Inflation-hedging, using both tax deferral combined with market growth potential, is made possible by variable annuities #. The company's well-known Rock symbol is an icon of strength, stability, expertise and innovation that has stood the test of time. Reference: 12.3.2.1 in the License Exam. D)I and III. A 1 The applicant and possibly the agent initial any changes made. C)none of these. Clusters of vesicles in various stages. Typically, they allow one withdrawal each year during the accumulation phase. D)I and II. A)Purchasing power risk. B) payments continue until the death of the primary owner. B) The proceeds minus John's cost basis taxed as ordinary income at Sue's tax rate. C)It will be higher. All of the following statements regarding variable annuities are true EXCEPT: A) variable annuities offer the investor protection against capital loss. In addition, if the customer is not at least 59-, there will be a tax penalty of an additional 10%. C) suggest to the client that perhaps a loan or refinancing his vacation home might be a better way to fund the contract purchase. *The owner of a life annuity with 10-year period certain will receive payments for life, subject to a minimum of 10 years. The growth portion is subject to a 10% penalty. Reference: 12.1.2 in the License Exam, Question #23 of 48Question ID: 901858 B) The policyowner. Travel Times Journal found that the average per person cost of a 10-day trip along the Pacific coast, per person, is $1,015. FINRA. Once annuitized, the number of annuity units does not vary. B)II and III. Reference: 12.1.2 in the License Exam. D) 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. A) mortality guarantee. D) a minimum of 10 years of variable payments, followed by additional variable payments for life The following changes have been incorporated into Special Publication 800145, as of the date indicated - . A passion for serving customers and a personal commitment to following through in a dynamic, fast-paced environment. Question #37 of 48Question ID: 606817 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 IV. have investment risk that is assumed by the investor While a variable annuity has the benefit of tax-deferred growth, its annual expenses are likely to be much higher than the expenses of a typical mutual fund. Reference: 12.2.1 in the License Exam, Question #48 of 48Question ID: 606835 Reference: 12.1.2 in the License Exam, Question #21 of 48Question ID: 606812 An annuity is an agreement for one person or organization to pay another a series of payments. The tax on this amount is $3,000. Cashing out life insurance policies or VAs where steep surrender charges are likely to exist, particularly in the earlier years of those contracts, is also considered abusive. Owners of variable annuities, like owners of mutual fund shares, may vote on changes in investment policy and for an investment adviser. Your 65-year-old client owns a nonqualified variable annuity. C) Age 40, currently unemployed A)each annuity unit's value and the number of annuity units vary with time. *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. What is the taxable consequence of this withdrawal to your client? A Variable Annuity Has Which of the Following Characteristics The money paid in will be returned tax free, but the earnings portion will be taxed as ordinary income. 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. A) It will be higher. There are two interest rates under fixed annuities. 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. 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. Fixed annuities, on the other hand, provide a guaranteed return. D)Municipal bonds. A) changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. Cashing out life insurance policies or VAs where steep surrender charges are likely to exist, particularly in the earlier years of those contracts, is also considered abusive. A variable annuity has two phases: an accumulation phase and a payout (annuitization) phase. A) Only during the payout period. The income was deferred from tax over the plan's life, so it is taxable as ordinary income once distributed. D) I and III. B) accumulation units. The accumulation unit's value is used to calculate the total value of the account. must be filed with FINRA. Each of the remaining statements are true. She will receive the annuity's entire value in a lump-sum payment. Do whatever you want with a Learn About Annuities and Their Myths - F&G: fill, sign, print and send online instantly. savingsbonds30,420Groupinsurance45,630$341,718\begin{array}{lrlr} The value of a variable annuity is based on the performance of an underlying portfolio of sub accounts selected by the annuity owner. vote for the investment adviser. We also reference original research from other reputable publishers where appropriate. C)I and IV. C)complete all paper work to purchase the annuity contract and obtain the clients signature immediately. The most suitable option and one considered effective for married couples is a single joint and last survivor contract. B) The death benefit cannot ever be more than the guaranteed benefit. Annuities are complicated products, so that may be easier said than done. C) The insurance company. A client has purchased a nonqualified variable annuity from a commercial insurance company. B)I and III. 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. If the annuitant dies during the accumulation period, his/her beneficiary will receive the promised annuity payments. A joint life with last survivor annuity: A) I and IV. Annuities: How to Find the Right One for You, How a Fixed Annuity Works After Retirement, Pros and Cons of Indexed Universal Life Insurance. vote on proposed changes in investment policy. used for the investment of funds paid by contract holders. D) 4200. A)the number of annuity units becomes fixed when the contract is annuitized. && \hspace{10pt}\text{Group insurance} & \underline{45,630}\\ Since the client is older than 59 at the time of distribution, the additional 10% penalty tax is not incurred. You can tailor the income stream to suit your needs. Home; About. Question #11 of 48Question ID: 606816 Question #24 of 48Question ID: 606806 D)Any tax due is deferred. 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. D)separate account may consist of mutual funds. must precede every sales presentation. D) I and III Your client owns a variable annuity contract with an AIR of 4%. 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. D)variable annuities offer the investor protection against capital loss. 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. B)Capital gains taxation on the earnings withdrawn in excess of the owner's basis. \hspace{10pt} Federal unemployment (employer only), 0.8%0.8\%0.8%. C)number of accumulation units. Question #17 of 48Question ID: 606802 Chapter 4: Annuities Flashcards | Chegg.com Payments from a variable annuity depend on the securities' value in the separate account's underlying investment portfolio. The number of accumulation units can rise during the accumulation period. An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are Get Started. A) Any tax due is deferred. (Check all that apply.) A) Fixed Annuity a life insurance holder lives longer than expected. All of the following are true about annuities EXCEPT: they have all the same characteristics as life insurance. Variable annuity Which of the following is characteristic of fixed annuities? C)Variable annuity contract with a discussion regarding interest rate risk B)fixed in value until the holder retires. All of the following statements about variable annuities are true EXCEPT: C) III and IV At the end of the year, your account has a value of $10,750 ($5,500 in the stock fund and $5,250 in the bond fund), minus fees and charges. If the owner of a variable annuity dies during the accumulation period, any death benefit will: Question #16 of 48Question ID: 606807 When a partial withdrawal is made from an annuity, the earnings are considered to be taken out first for tax purposes (or LIFO). A) The policy provides a minimum guaranteed death benefit. A) Money market fund. *A periodic payment immediate annuity is a contradiction in terms. 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. Which of the following is characteristic of variable annuities? A)the yield is always higher than mortgage yields. Universal variable life policies One of the following would achieve that objective but a suitability discussion regarding it's risk should also occur. B)IRAs. B) II and III Investopedia does not include all offers available in the marketplace. B) the safety of the principal invested. Therefore, ordinary income taxes will apply to the entire $10,000. A joint life with last survivor contract covers multiple annuitants and ceases payments at the death of the last surviving annuitant. All of the following are accurate statements to make to the client EXCEPT The figure below illustrates a six-month annuity with monthly payments. A)an accounting measure used to determine the contract owner's interest in the separate account. The fixed payment that the annuitant receives loses purchasing power over time as a result of inflation. When the second party dies, all payments cease. It is innate and universal. B)FINRA. CDs insured by the FDIC. The beneficiary is taxed at ordinary income rates during the year the lump sum is received. The minimum guaranteed death benefit is provided by that portion of the payment invested in the insurance company's general account. This factor is used to establish the dollar amount of the first annuity payment. A) Age 56, available cash to invest, makes the maximum retirement plan contributions to an existing IRA and 401(k) plan B) Age 78, retired for 20 years, lives comfortably and wants to leave all liquid assets to children A variable annuity is both an insurance and a securities product. Then find the probability of the event. Reference: 12.2.1 in the License Exam. no. Who assumes the investment risk in a variable annuity contract? She may choose to receive monthly payments for the rest of her life. B) I and III. PDF Variable Annuities: What You Should Know - SEC Reference: 12.3.1 in the License Exam. \hspace{10pt} Medicare, 1.5%1.5\%1.5% C) insurance guarantee. Reference: 12.3.4 in the License Exam, Chapter 16: U.S. Government and State Rules a, Chapter 17: Other SEC and SRO Rules and Regul, Chapter 15: Ethics, Recommendations, and Taxa, Chapter 13: Direct Participation Programs, Fundamentals of Financial Management, Concise Edition, Joe B. Hoyle, Thomas F. Schaefer, Timothy S. Doupnik, Carl Warren, James M Reeve, Jonathan E. Duchac. 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. *Annuity death benefits are generally paid in a lump sum. C) 100% tax free. D) II and III. 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. must be filed with FINRA. C)with guaranteed minimum withdrawal benefits (GMWBs) the periodic payments can be monthly, quarterly or annually D)each annuity unit's value is fixed, but the number of annuity units varies with time. C)the number of annuity units is fixed, and their value remains fixed. Explain what is meant by positive and negative C) II and IV. C) II and IV. Question #26 of 48Question ID: 606811 B) A 30 year old construction worker recently unemployed who wants to invest his severance pay amounting to 9 months salary. B) Municipal bonds. Reference: 12.1.2.1.1 in the License Exam. C) It will stay the same. In a variable life annuity with 10-year period certain, a contract holder receives: Consequently, the client pays taxes only on the growth portion of the withdrawal ($10,000). A) partially a tax-free return of capital and partially taxable. C)III and IV. An annuity is an insurance product that promises to pay out income at a future date based on invested funds. The number of annuity units is fixed. Practice all cards. A) periodic payment immediate annuity. Financial Sales Professional Job in Fort Worth, TX at New York Life A) defined contribution plans. C) 10% penalty plus payment of ordinary income tax on all funds withdrawn exceeding basis. Once a variable annuity has been annuitized: During payout, distributions will fluctuate due to performance in the separate account. c. The separate account provides for a guaranteed minimum return. If one purchases an annuity for a set price, the issuing company would invest the funds and hold them until they are supposed to be disbursed, generally based on the owner's age. "Variable Annuities: What You Should Know," Page 6. D) value of accumulation units. C) I and III. B)100% taxable. *The accumulation period of a variable annuity may continue for many years. Reference: 12.3.1 in the License Exam, Question #30 of 48Question ID: 606833 And, unlike a fixed annuity, variable annuities do not provide any guarantee that you will earn a return on your investment. The number of accumulation units is always fixed throughout the accumulation period. Senior Customer Care Advocate Annuities ($22 per hour) in Warwick The value of these units varies with the performance of the separate account. 6102..55.001) is being updated on an ongoing basis. B) Life annuity. A) I and III. C)Keogh plans. Question #31 of 48Question ID: 606836 Immediate life annuity. They are also riddled with fees, which can cut into profits. D)all return of cost basis and nontaxable, Annuitized payments from a variable annuity are viewed for tax purposes as part earnings and part cost basis. During the accumulation phase, you make purchase payments. Variable Annuity Features | Annuity Guys Over the past five years, 's dividend yield has averaged % per year. guarantees payments for a certain period of time. *When money is deposited into the annuity, it is purchasing accumulation units. Question #22 of 48Question ID: 606803 D) I and IV. The funds in an annuity are off-limits to creditors and other debt collectors. A) Capital gains taxation on the earnings withdrawn in excess of the owner's basis. A) the investment portfolio is managed professionally. D) I and III. Assuming that the payroll for the last week of the year is to be paid on December 313131, journalize the following entries: B) a variable annuity contract is not required to be sold by prospectus because it is an insurance contract are purchased primarily for their insurance features Needs - are goal-directed forces that people experience. the state banking commission. Trends Networks and Critical Thinking Module 2 B) II and IV. A 10% penalty applies only if distributions begin before age 59-. B)Fixed annuity contract with a discussion regarding timing risk A) A variable annuity Once a customer annuitizes a variable annuity, which of the following statements are TRUE? In addition, an element of risk must be present. C) During the annuity period. *Fixed income instruments, like bonds and fixed annuities, are subject to purchasing power risk. When the contract is annuitized, the annuitant is credited with a fixed number of annuity units. A) a minimum rate of return is guaranteed. A. Question #12 of 48Question ID: 606814 In addition, if the customer is not at least 59-, there will be a tax penalty of an additional 10%. C) Universal variable life policy. B)It will be lower. Reference: 12.1.4.2 in the License Exam. There is a guaranteed minimum interest rate, normally amounting to between 1 and 3 percent. The owner of a variable annuity has all of the following rights EXCEPT It may be used by nongovernmental . 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. The Project Gutenberg eBook of Memoirs of Extraordinary Popular 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: 12.3.3 in the License Exam, Question #34 of 48Question ID: 606834 The payout compared to last month's payout. In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. *Payments from a variable annuity depend on the securities' value in the separate account's underlying investment portfolio. B. D) Any time before the accumulation period. The number of annuity units is fixed at the time of annuitization. C)II and IV. The earnings on dollars invested into a variable annuity accumulate tax deferred, which is why variable annuities are popular products for retirement accumulation. Francisco R. - Financial Professional - Prudential Financial | LinkedIn Any withdrawals you make prior to the age of 59 may also be subject to a 10% tax penalty. The value of the customer's account is converted into annuity units if and when the customer decides to annuitize the contract. C) with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed Simple and general annuities problems with solutions D)accumulation units. C) II and IV. B) variable annuities. The value of accumulation and annuity units varies with the investment performance of the separate account. 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. An investor owning which of the following variable annuity contracts would hold accumulation units? II) It has an internal capital market wherein each division competes for funds. B) The entire $10,000 is taxable as ordinary income. B)a minimum rate of return is guaranteed. Distributions to the annuitant will fluctuate during the payout period. The fees on variable annuities can be quite hefty. C) 3000. A)I and IV. CH 7 Annuities Flashcards | Quizlet These contracts cover both lives and will continue to make payments until the last spouse dies. At the end of the year your account has a value of 10750. B)Universal variable life policy. III. During the accumulation phase, the number of accumulation units will increase as additional money is invested. A) a variable annuity contract will provide a fluctuating monthly check upon the annuitization of the contract A) Fixed annuities. A) be paid to a designated beneficiary. B)Variable annuities. 's dividend yield was % last year. A customer has contributed $1,000 a year for 10 years to his tax-deferred nonqualified variable annuity. Frequently Asked Questions Anti-Money Laundering Program and Suspicious When may a variable annuity account be surrendered? 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. D) the payout plans provide the client income for life. All of the following statements concerning a variable annuity are correct EXCEPT: If an insurance holder dies sooner than expected, the insurance company will have to pay the death benefit sooner. D)I and III. IV. A) 2800. However, at the end of the period certain the payments to the named beneficiary (the spouse) will stop. The entire amount is taxed as ordinary income. The work environment characteristics are normal office conditions. Unit 12: Variable Annuities Flashcards | Chegg.com 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. 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. 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. In the case of deferred annuities, this is often referred to as the accumulation phase. 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: