He makes the following four statements, all of which are true EXCEPT \end{array} With variable annuities policyholders can choose from a number of investment opportunities. What are the characteristics of fixed annuities? - InsuranceQnA Variable annuities operate in similar ways to . B) 0. For example, when paying rent, the rent payment (PMT) C)Corporate bonds. B) I and III. U.S. Securities and Exchange Commission. *The number of variable annuity accumulation units can rise during the accumulation period when additional units are being purchased. A customer has contributed $1,000 a year for 10 years to his tax-deferred nonqualified variable annuity. A) periodic payment immediate annuity. 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. \hspace{10pt} Medicare, 1.5%1.5\%1.5% D)II and IV. A)II and IV. Based on this information the RR should: The number of annuity units rises once annuitization begins. C)the invested money will be professionally managed according to the issuers' investment objectives. must be filed with FINRA. A variable annuity is just a tax-deferred annuity in which you get to choose how the value of the annuity is invested. Annuity death benefits are generally paid in a lump sum. Distributions from such an annuity are computed on a LIFO basis with the income taxed first. Reference: 12.3.3 in the License Exam, Question #34 of 48Question ID: 606834 C) II and III. D) III and IV. For an investor, which of the following is the most important factor in determining the suitability of a variable annuity investment? b) What probability is the 20%20 \%20% mentioned above? Variable annuities were introduced in the 1950s as an alternative to fixed annuities, which offer a guaranteedbut often lowpayout during the annuitization phase. a variable annuity does not guarantee an earnings rate of return. Reference: 12.3.3 in the License Exam. 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. 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. One of the following would achieve that objective but a suitability discussion regarding it's risk should also occur. a variable annuity guarantees payments for life. None of the other investments listed here offer tax-deferred growth. C) Universal variable life policy. Your customer in his early 30s has received a modest inheritance from a relative. Question #28 of 48Question ID: 606821 Chapter 6-Classification Annuities Flashcards | Quizlet C)Variable annuity contract with a discussion regarding interest rate risk C) Mutual fund portfolio consisting of blue chip stocks 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. # 7 Annuities Flashcards | Quizlet C)such an annuity is designed to combat inflation risk. Upon John's death during the accumulation period, Sue takes a lump-sum payment. When a partial withdrawal is made from an annuity, the earnings are considered to be taken out first for tax purposes (or LIFO). D)variable annuities offer the investor protection against capital loss. Her agent recommended she choose a variable annuity as a safe haven for the funds. The paper publication will not be rereleased. *The return on a variable annuity is not guaranteed; it is determined by the underlying portfolio's value. If the account is annuitized, the investor has chosen a payout option. Your client has a large sum of money to invest from the proceeds of the sale of his home. Once a variable annuity has been annuitized: The value of the separate account is now $30,000. Investopedia does not include all offers available in the marketplace. 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. Consequently, the client pays taxes only on the growth portion of the withdrawal ($10,000). 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. D) 4200. 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. 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. Variable annuities are riskier than fixed annuities because the underlying investments may lose value. Fixed annuities are not considered securities as return is guaranteed by the insurance company issuer. B)fixed in value until the holder retires. A)II and III. C) II and IV. D) Variable annuities. B) During the accumulation period. That can adversely affect your returns over the long term, compared with other types of investments. C)annuity units. D) III and IV. 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. D) There is no guarantee regarding the investment results of the separate account. A. She may choose to receive monthly payments for the rest of her life. Chapter 7: Annuities Flashcards | Quizlet Sample problems from Chapter 9 . *The accumulation period of a variable annuity may continue for many years. Reference: 12.3.1 in the License Exam. II. Question #47 of 48Question ID: 606813 Reference: 12.3.2.1 in the License Exam. *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. It is innate and universal. Do homework Doing homework can help you learn and understand the material covered in class. This describes which of the following annuities? For a nonqualified variable annuity, cost basis for the annuitant would use the after-tax dollars contributed. A variable annuity has two phases: an accumulation phase and a payout (annuitization) phase. C)Money market fund. *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 SEC. A) changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. Changes in payments on a variable annuity correspond most closely to fluctuations in the: Based on this information the RR should: B) variable annuities are classified as insurance products. Surrender fees and penalties for early withdrawal. Most annuities will not allow you to withdraw additional funds from the account once the payout phase has begun. The number of annuity units becomes fixed when the contract is annuitized; it is the value of each unit that fluctuates. Are Variable Annuities Subject to Required Minimum Distributions? A) A 75 year old women, who is a former executive retired for over ten years who wants to preserve as much capital as she can to leave to her two grandchildren. 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. *Contributions to a nonqualified variable annuity are not tax deductible. The following are the characteristics or the hierarchy of a trend except A. Gigatrends C. Megatrends B. Macrotrends D. Nanotrends _____11. Question #12 of 48Question ID: 606814 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. I. 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. Based only on these facts, the variable annuity recommendation is B)100% taxable. A)II and IV. continues payments only as long as all annuitants are still alive. C)Keogh plans. A guaranteed death benefit guarantees that the beneficiary will receive a death benefit if the annuitant dies before the annuity begins paying benefits. All of the following statements about variable annuities are true EXCEPT: Because common stocks are not fixed dollar investments, they have the opportunity to keep pace with inflation. B) A 30 year old construction worker recently unemployed who wants to invest his severance pay amounting to 9 months salary. Unit 12: Variable Annuities Flashcards | Chegg.com B) The death benefit cannot ever be more than the guaranteed benefit. C) number of accumulation units. If a customer is about to buy a variable annuity contract and wants to select an annuity with a payout option providing the largest possible monthly payment, which of the following payout options would be most suitable? Over the following year, the stock fund has a 10% return, and the bond fund has a 5% return. C)Mortality risk. *A periodic payment immediate annuity is a contradiction in terms. The earnings are taxable but the cost basis is returned tax free. GuranteedExamLife Flashcards by Gabriel Martinez | Brainscape . Dividing the funds available so as to fund 2 separate contracts, whether they be joint with last survivor or life income, would not be cost efficient for spouses. A)III and IV. Diagnosis is made by punch biopsy. Your 55-year-old client invested $50,000 four years ago in a nonqualified variable annuity. C) II and III. Qualified Longevity Annuity Contract (QLAC): Definition, Taxes, and Example, Present Value of an Annuity: Meaning, Formula, and Example, Future Value of an Annuity: What Is It, Formula, and Calculation, Calculating Present and Future Value of Annuities, Present Value Interest Factor of Annuity (PVIFA) Formula, Tables. A universal variable life policy should be purchased primarily for its insurance features, not its investment features. The money paid in will be returned tax free, but the earnings portion will be taxed as ordinary income. Question #40 of 48Question ID: 606800 C) insurance companies keep variable annuity funds in separate accounts from other insurance products. A) Ordinary income tax on earnings exceeding basis. 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) Growth mutual funds. Question #41 of 48Question ID: 606801 Can I Borrow from My Annuity for a House Down Payment? A) Dow Jones Industrial Average. D)accumulation units. What is her total tax liability? D) None, because it is the proceeds from a life insurance company. Variable Annuities. A)Fixed annuity contract with a discussion regarding purchasing power risk It may be used by nongovernmental . Reference: 12.1.2 in the License Exam, Question #23 of 48Question ID: 901858 If the data is normally distributed with standard deviation$198, find the percent of vacationers who spent less than $1,200 per day. B) Corporate debt securities She will receive the annuity's entire value in a lump-sum payment. savingsbonds30,420Groupinsurance45,630$341,718\begin{array}{lrlr} Distributions from such an annuity are computed on a LIFO basis with the income taxed first. 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. Immediate life annuity. B) accumulation units. Of the answer choices given the best would be to reevaluate the recommendation based on the new information tendered by the client. B)I and III. Spartan Technology Services and Solutions Private Limited is a subsidiary of IBM (International Business Machines) Corporation. D) a minimum of 10 years of variable payments, followed by additional variable payments for life. Because the client is older than age 59-, he does not pay 10% premature distribution penalty tax. D) periodic payment deferred annuity. A guaranteed lifetime annuity promises to pay the owner an income for the rest of their life. II) It has an internal capital market wherein each division competes for funds. The return on a variable annuity is not guaranteed; it is determined by the underlying portfolio's value. C)3800. 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 customer, who has contributed to an IRA and to an employer matching 401(k) plan continuously for many years, wants to purchase an annuity contract to add additional monthly income once retired. Describe. Job Classification: Corporate - Legal and Compliance. During the accumulation phase, you make purchase payments. C) The ordinary income on the proceeds over the cost basis plus 10% of the net gain (if any) if Sue is younger than 59- years old. A) an accounting measure used to determine payments to the owner of the variable annuity. B) II and IV. A) Ordinary income tax on earnings exceeding basis. 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. All of the following statements concerning a variable annuity are correct EXCEPT: A) a minimum rate of return is guaranteed. *Only variable annuities have payout plans that provide the client income for life. The growth portion is taxed as ordinary income. Annuities | FINRA.org Immediate annuities purchase annuity units directly. *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: 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. Refinancing a home to draw out equity has been identified by FINRA as an abusive sales tactic regarding the sales of VAs. A client has purchased a nonqualified variable annuity from a commercial insurance company. B) value of annuity units. B) The proceeds minus John's cost basis taxed as ordinary income at Sue's tax rate. d. Each month the payment will increase, decrease, or remain the same as the previous month's payment . B) The policyowner. B) 100% taxable. A)each annuity unit's value and the number of annuity units vary with time. This factor is used to establish the dollar amount of the first annuity payment. B)Universal variable life policy. B) variable annuities. A 60-year-old individual, nearing retirement who has both IRAs and a 401k in place, is comfortable with market risk associated with the stock market, and has a lump sum in cash available to fund the annuity D)II and III. A) I and II. Drives - are hardwired characteristics of the brain that correct deficiencies or maintain an internal equilibrium by producing emotions to energize individuals. PDF The NIST definition of cloud computing savingsbondsGroupinsurance$198,74451,71415,21030,42045,630$341,718, Tax rates assumed: C) Age 40, currently unemployed This guideline has been prepared for use by Federal agencies. 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 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. 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) prime rate. 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. In addition, if the customer is not at least 59-, there will be a tax penalty of an additional 10%. Question #13 of 48Question ID: 606822 The entire amount is taxed as ordinary income. During payout, distributions will fluctuate due to performance in the separate account. 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. The owner of a variable annuity has all of the following rights EXCEPT the right to vote: a. for the board of trustees b. to change the separate account's investment objective c. for distributing income and capital gains d. for dissolution of the trust c. for distributing income and capital gains. A 45-year-old employed individual with no other retirement accounts in place C)II and IV. & \underline{\underline{\$1,014,000}} & \hspace{10pt} \text{U.S. savings bonds} & 30,420\\ The number of annuity units varies. used for the investment of funds paid by contract holders. C)the number of annuity units is fixed, and their value remains fixed. The separate account is used for both variable life insurance and variable annuity investments. B) life income Life income riders are best suited for those who anticipate a lengthy retirement and are generally not yet retired when making the VA purchase. Variable Annuities | Investor.gov The creation of an estate. && \hspace{10pt}\text{Group insurance} & \underline{45,630}\\ III. When the contract is annuitized, the annuitant is credited with a fixed number of annuity units. A 10% penalty applies only if distributions begin before age 59-. Variable annuity Which of the following is characteristic of fixed annuities? How Variable Life Insurance Works: Pros and Cons - ValuePenguin Post navigation *Waiver of premium is a benefit available on qualified life insurance contracts, usually in the form of a rider, which provides for the waiver of premium payments that fall due while the policyholder is totally disabled. The holder of a variable annuity receives the largest monthly payments under which of the following payout options? A)exempt from taxes 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. A registered representative recommends a variable annuity with an income rider to a client. D) a minimum of 10 years of variable payments, followed by additional variable payments for life "Variable Annuities: What You Should Know," Page 10. D) Variable annuities. You can buy an annuity with either a lump sum or a series of payments, and the accounts value will grow accordingly. 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. Reference: 12.1.2 in the License Exam. A registered representative explaining variable annuities to a customer would be CORRECT in stating that: As part of the registration requirements, a prospectus must be filed and distributed to prospective investors. Distributed along a dermatome. B)a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero A)There is no tax as the withdrawal is considered return of capital. A) mortality guarantee. B) I and II. Which of the following statements regarding variable annuities are TRUE? C) IRAs. The number of variable annuity accumulation units can rise during the accumulation period when additional units are being purchased. Question #22 of 48Question ID: 606803 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. C) Life annuity with period certain. B)changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. D) 4500. A) III and IV. Reference: 12.3.2.1 in the License Exam. The value of a variable annuity is based on the performance of an underlying portfolio of sub accounts selected by the annuity owner. A joint-and-last-survivor annuity is a payout option where: C)prime rate. B)part earnings and part cost basis How is the distribution taxed? B) Municipal bonds. 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. b. The Project Gutenberg eBook of Memoirs of Extraordinary Popular e) Are From the United States and Log on every day independently? *Under the mortality guarantee, the insurance company assumes mortality risk by guaranteeing payments for life, though the amount of each payment is not guaranteed. B)corporate stock. Question #26 of 48Question ID: 606811 *Variable annuity contracts were devised to help investors keep pace with inflation. the state insurance commission. There are also immediate annuities, which begin paying income right away. Though there is no beneficiary designation during the annuitization, this is not an issue for this annuitant. U.S. Securities and Exchange Commission. However, it does guarantee payments for life (mortality). Uses in Investing, Pros, and Cons, Indexed Annuity: Definition, How It Works, Yields, and Caps. Premiums made into the annuity purchase accumulation units. An annuity is a continuous stream of equal periodic payments from one party to another for a specified period of time to fulfill a financial obligation. The separate account is NOT likely to invest in: Question #46 of 48Question ID: 606796 Deal with mathematic Math is all about solving equations and finding the right answer. However, at the end of the period certain the payments to the named beneficiary (the spouse) will stop. A) The fact that the annuity payment may increase or decrease. D) II and IV. Facebook reports that 70%70 \%70% of their users are from outside the United States and that 50%50 \%50% of their users log on to Facebook daily. C) the client assumes the investment risk. Variable Annuities Flashcards - Cram.com Before the contract is annuitized, your client, currently age 60, withdraws some funds for personal purposes. C)insurance companies keep variable annuity funds in separate accounts from other insurance products. An annuity is an agreement for one person or organization to pay another a series of payments. The client's investment objectives, tax bracket, investment experience and risk tolerance all align well with a VA recommendation. B)cost of living. The value of the separate account is now $30,000. Deferred Annuity Definition, Types, How They Work, What Is a Fixed Annuity? PDF Prudential IncomeFlex Target Vanguard Balanced Index Fund Because the client is older than age 59-, he does not pay 10% premature distribution penalty tax. C) 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? Question #31 of 48Question ID: 606836 C) single payment immediate annuity. The work environment characteristics are normal office conditions. Single payment deferred annuity. B)I and II With regard to a variable annuity, all of the following may vary EXCEPT: Her intent was to use the funds for the down payment on a house after graduation. If the customer takes a withdrawal of $10,000, what are the tax consequences? C) III and IV. A) taxed at a reduced rate. B) a variable annuity contract is not required to be sold by prospectus because it is an insurance contract