B) Municipal bonds. Chapter 12 - Variable Annuities Flashcards | Chegg.com The separate account is used for both variable life insurance and variable annuity investments. a) What percentage of Facebook's users are from the United States? Chapter 6-Classification Annuities Flashcards | Quizlet A) variable annuities offer the investor protection against capital loss. Based on the clients profile which of the following would be the best recommendation? Guaranteed Lifetime Annuity: How They Work, When They Pay You, This is also generally true of retirement plans. For example, if the income is monthly, the first payment comes one month after the immediate annuity is bought. 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. IV. Simple and general annuities problems with solutions The growth portion is taxed as ordinary income. Typically, they allow one withdrawal each year during the accumulation phase. . D) Variable annuity. Sample problems from Chapter 9 . An annuity may be purchased under all of the following methods EXCEPT: All of the following statements about variable annuities are true EXCEPT: D)It cannot be determined until the April return is calculated. A) two people are covered and payments continue until the second death. III. C) 100% tax free. How to Rollover a Variable Annuity Into an IRA. IBM is a global brand and has its presence in 170 countries and operates . 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. The money paid in will be returned tax free, but the earnings portion will be taxed as ordinary income. required to be located off of the company's premises. What is her total tax liability? An immediate annuity is designed to pay an income one time-period after the immediate annuity is bought. A)exempt from taxes C)not suitable because a lifetime income rider is only for someone who is already retired A 10% penalty applies only if distributions begin before age 59-. Variable Annuities Flashcards - Cram.com The value of accumulation and annuity units varies with the investment performance of the separate account. Once annuitized, the number of annuity units does not vary. And, unlike a fixed annuity, variable annuities do not provide any guarantee that you will earn a return on your investment. A) waiver of premium What Are the Risks of Annuities in a Recession? b. A separate account will invest in a number of different securities. Many variable annuities invest the separate account in mutual funds. C)the invested money will be professionally managed according to the issuers' investment objectives. 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. Which of the following recommendations would best meet the customer profile? 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. 222. *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. The entire amount is taxed as ordinary income. Word bank:Fixed, Variable Fixedannuities provide a guaranteed rate of return, whereas Variableannuities provide conservative to aggressive investments whose rates of return are not guaranteed. a life insurance holder lives longer than expected. III. 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)fixed in value until the holder retires. 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. This compensation may impact how and where listings appear. B) the number of annuity units is fixed, and their value remains fixed. 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. A) III and IV. Her intent was to use the funds for the down payment on a house after graduation. *A variable annuity is a security and must be registered with the SEC, not FINRA. With regard to a variable annuity, all of the following may vary EXCEPT: a variable annuity does not guarantee an earnings rate of return. How to Navigate Market Volatility While Saving for Retirement, Variable Annuity: Definition and How It Works, Vs. All of the following statements regarding variable annuities are true EXCEPT: Based on this information the RR should: How is the distribution taxed? Which of the following are defined as securities? The LATF-adopted ILVA Actuarial Guideline has an effective date of July 1, 2024 for contracts, riders or endorsements issued on or after that date. A) an accounting measure used to determine payments to the owner of the variable annuity. An individual retirement annuity is an investment vehiclesimilar to an individual retirement accountthat is offered by insurance companies. B)unsuitable because her situation exposes her to surrender charges and early withdrawal penalties in exchange for insufficient benefits. Question #18 of 48Question ID: 606827 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? A)variable annuities will protect an investor against capital loss. must precede every sales presentation. B)cost of living. In March, the actual net return to the separate account was 8%. Every annuity has some characteristics in common. A) I and III. A. D) Capital gains tax on earnings exceeding basis. Upon John's death during the accumulation period, Sue takes a lump-sum payment. There are two interest rates under fixed annuities. C) 10 years of variable payments. *The investor has already paid tax on the contributions but the earnings have grown tax-deferred. Periodic payment deferred annuity. Reference: 12.3.3 in the License Exam, Question #34 of 48Question ID: 606834 A variable annuity is a security and must be registered with the SEC, not FINRA. B)reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. A) be paid to a designated beneficiary. A)II and IV. A 3 However, at the end of the period certain the payments to the named beneficiary (the spouse) will stop. 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. B) 0. D)each annuity unit's value is fixed, but the number of annuity units varies with time. C)I and IV. You can buy an annuity with either a lump sum or a series of payments, and the accounts value will grow accordingly. 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. \hspace{10pt} Social security, 6%6\%6% on first $100,000\$100,000$100,000 of employee annual earnings C)number of accumulation units. \hspace{10pt} \text{Sales salaries} & \$\hspace{5pt} 670,000 & \hspace{10pt} \text{Income tax withheld} & \$198,744\\ The time period depends on how often the income is to be paid. *Variable annuity contracts were devised to help investors keep pace with inflation. *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. Solved The following are characteristics of a public | Chegg.com Post navigation Who assumes the investment risk in a variable annuity contract? B)value of annuity units. The tax on this amount is $3,000. Reference: 12.3.3 in the License Exam. Ideally they should be funded with readily available cash rather than using funds liquidated from existing investments. B)I and IV. A) It will be higher. Fixed Annuity, Retirement Annuities: Know the Pros and Cons. C)annuity units. The remainder of the premium is invested in the separate account. An 18-year-old, unmarried high school student sought a safe investment for a $30,000 bequest until after she graduated from college. Which of the following is NOT associated with characteristics of shares D) I and II. 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. *Once a variable annuity is annuitized, the accumulation units are converted into a fixed number of annuity units. When a variable annuity contract is annuitized, the number of annuity units is fixed. Reference: 12.1.2 in the License Exam. All of the following are true about annuities EXCEPT: they have all the same characteristics as life insurance. B) suitable if she has enough equity in the home to fund the variable annuity without cashing out the other VA contract Reference: 12.3.2.1 in the License Exam. A) The fact that the annuity payment may increase or decrease. Describe. a. B)changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. B) Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. Which of the following recommendations would best meet the customer profile? Once a variable annuity has been annuitized: C) Mutual fund portfolio consisting of blue chip stocks The number of accumulation units can rise during the accumulation period. Reference: 12.1.4.2 in the License Exam. These contracts come with high surrender charges. Policyholders . A)Joint tenants annuity. Withdrawals from a nonqualified variable annuity are made on a LIFO basis, so the taxable earnings are considered taken out before principal. a. it performs a single task b. it is self-contained and independent of other modules c. it is relatively short d. all of the above are chamcleristics of a program module 7. Transcribed image text: 6. Fixed Annuity: A fixed annuity is a type of annuity contract that allows for the accumulation of capital on a tax-deferred basis. variable annuity without paying tax at the time of the transfer. \hspace{7pt} a. December 303030, to record the payroll. GuranteedExamLife Flashcards by Gabriel Martinez | Brainscape This makes a total of $4,000 tax and penalty paid on the random withdrawal. b) What probability is the 20%20 \%20% mentioned above? C)earnings only and taxable If your customer invests in a variable annuity and chooses to annuitize at age 65, which of the following statements are TRUE? Income that cannot be outlived by the owner All of the following are accurate statements to make to the client EXCEPT Your customer is interested in a variable annuity but is unclear on some of the details regarding different specifications and riders that can be attached to the contract. 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: D)Joint and last survivor annuity. D)variable annuities offer the investor protection against capital loss. B) II and III. LESSON 7: ANNUITIES - FIXED AND VARIABLE - course.uceusa.com A)I and IV. 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: If the data is normally distributed with standard deviation$198, find the percent of vacationers who spent less than $1,200 per day. order now. D) Variable annuities. Travel Times Journal found that the average per person cost of a 10-day trip along the Pacific coast, per person, is $1,015. D) I and III. A rider or statement of condition that allows a variable life insured to maintain policy coverage after becoming disabled is a benefit known as B)Value of each annuity unit each month. C)I and III. D)suggest to the client that perhaps a loan or refinancing his vacation home might be a better way to fund the contract purchase. On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity). Round to the nearest hundredth of a percent. must precede every sales presentation. A) Fixed Annuity Reference: 12.2.1 in the License Exam. B)I and III. An annuitant assumes the investment risk of a variable annuity and is not protected byt he insurance company from capital losses. 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. D)Dow Jones Industrial Average. A) I and IV. B) single payment deferred annuity. During the accumulation phase, you make purchase payments. Science Health Science Nursing. I. C)III and IV. Variable Annuity: Definition and How It Works, Vs. Fixed Annuity Annuities due are a type of annuity where payments are made at the beginning of each payment period. A) periodic payment immediate annuity. D) tax free. A) It will be higher. A) Joint tenants annuity. The fees on variable annuities can be quite hefty. View full document. B) The policyowner. 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: \text{Salaries:} && \text{Deductions:}\\ The separate account is NOT likely to invest in: An annuity is an agreement for one person or organization to pay another a series of payments. Future annuity payments will vary according to the separate account's performance. B) Age 78, retired for 20 years, lives comfortably and wants to leave all liquid assets to children He wants to ensure that the client, in addition to meeting suitability requirements, is aware of certain variable annuity contract characteristics. II. Which of the following is not a characteristic of a program module? 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. Her agent recommended she choose a variable annuity as a safe haven for the funds. All of the following investment strategies offer either fully or partially tax-deductible contributions to individuals who meet eligibility requirements EXCEPT: A registered representative recommends a variable annuity with an income rider to a client. C)the number of annuity units is fixed, and their value remains fixed. B) fixed payments for 10 years, followed by variable payments for life. Which of the following statements regarding variable annuities are TRUE? C)suitable due to the death benefit features of a variable annuity. *The minimum guaranteed death benefit is provided by that portion of the payment invested in the insurance company's general account. During the . 111. 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. Based only on these facts, the variable annuity recommendation is B) Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. This would not align with the couple's criteria for coverage as long as they both live. Fixed income instruments, like bonds and fixed annuities, are subject to purchasing power risk. B) II and IV. If your customer invests in a variable annuity and chooses to annuitize at age 65, which of the following statements are TRUE? Which of the following is not characteristic of a fixed annuity? When the second party dies, all payments cease. Is F&G Annuities & Life Inc (FG) a Good Dividend Stock? | AAII *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. are purchased primarily for their insurance features A)III and IV. C) value of underlying securities held in the separate account. One of the following would achieve that objective but a suitability discussion regarding it's risk should also occur. C) II and III. A)the number of annuity units becomes fixed when the contract is annuitized. C)A 10% penalty plus the payment of ordinary income tax on all of the funds withdrawn. Spartan Technology Services and Solutions Private Limited is a subsidiary of IBM (International Business Machines) Corporation. D) I and IV. D) Joint and last survivor annuity. Deferred Annuity Definition, Types, How They Work, What Is a Fixed Annuity? covers more than one person. B) prime rate. A customer has an investment objective of keeping pace with inflation while assuming moderate risk. A) Fixed Annuity Listing tax-deferred growth as an objective for retirement income, which of the following investments is most suitable? The number of annuity units varies. The number of annuity units becomes fixed when the contract is annuitized; it is the value of each unit that fluctuates. When a variable annuity contract is annuitized, the number of annuity units is fixed. C) Age 40, currently unemployed C) III and IV Her intent was to use the funds for the down payment on a house after graduation. A universal variable life policy should be purchased primarily for its insurance features, not its investment features. A customer has a nonqualified variable annuity. The client's investment objectives, tax bracket, investment experience and risk tolerance all align well with a VA recommendation. C) I and III. D) I and IV. D) II and IV. Reference: 12.3.4 in the License Exam. An annuity is an insurance product that promises to pay out income at a future date based on invested funds. 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: These include white papers, government data, original reporting, and interviews with industry experts. Question #11 of 48Question ID: 606816 A client has purchased a nonqualified variable annuity from a commercial insurance company. Owners of variable annuities, like owners of mutual fund shares, may vote on changes in investment policy and for an investment adviser. CDs insured by the FDIC. C)I and IV. D) Two-thirds of the withdrawal is taxable as ordinary income. Diagnosis is made by punch biopsy. A) I and IV. The value of the annuity units varies. A deferred annuity is an insurance contract that promises to pay the buyer a regular stream of income, or a lump sum, at some date in the future. *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. A joint-and-last-survivor annuity is a payout option where: A registered representative explaining variable annuities to a customer would be CORRECT in stating that: Variable annuity salespeople must register with all of the following EXCEPT: A) FINRA. As part of the registration requirements, a prospectus must be filed and distributed to prospective investors. The number of annuity units is fixed. C)complete all paper work to purchase the annuity contract and obtain the clients signature immediately. 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. Distributions from such an annuity are computed on a LIFO basis with the income taxed first. Reference: 12.1.2 in the License Exam. For a retired person, which of the following investments would provide the greatest protection against inflation? savingsbonds30,420Groupinsurance45,630$341,718\begin{array}{lrlr} 7 - Annuities Flashcards | Quizlet

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