a variable annuity has which of the following characteristics

the state banking commission. C) III and IV. Simple and general annuities problems with solutions D) The investment risk is shared between the insurance company and the policyowner. An annuity factor is taken from the annuity table, which considers, for example, the investor's sex and age. Variable annuities were introduced in the 1950s as an alternative to fixed annuities, which offer a guaranteedbut often lowpayout during the annuitization phase. The fees on variable annuities can be quite hefty. MetLife offers a comprehensive benefits program, including healthcare benefits, life insurance, retirement benefits, parental leave, legal plan services and paid time off. This makes a total of $4,000 tax and penalty paid on the random withdrawal. Your client owns a variable annuity contract with an AIR of 4%. A Variable Annuity has which of the following characteristics? Reference: 12.3.1 in the License Exam. *An immediate annuity has no accumulation period. A) periodic payment immediate annuity. She may choose to receive monthly payments for the rest of her life. They are also riddled with fees, which can cut into profits. an annuitant dies sooner than expected. A) A variable annuity D) Keogh plans. They offer broad diversification in the securities market and potential growth, all while using the power of tax deferral. Distributions to the annuitant will fluctuate during the payout period. Of the answer choices given the best would be to reevaluate the recommendation based on the new information tendered by the client. During the payout period, payments are based on a fixed number of annuity units established when the contract was annuitized. A)II and III. 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. B) a variable annuity contract is not required to be sold by prospectus because it is an insurance contract The following changes have been incorporated into Special Publication 800145, as of the date indicated - . All of the following are accurate statements to make to the client EXCEPT CDs insured by the FDIC. Reference: 12.1.4 in the License Exam. When the second party dies, all payments cease. Distribution of dividends occurs during the accumulation period. Her agent recommended she choose a variable annuity as a safe haven for the funds. B)a majority vote from the shareholders is required to change the investment objectives. B) Age 78, retired for 20 years, lives comfortably and wants to leave all liquid assets to children Periodic payment deferred annuity. A)There is no tax as the withdrawal is considered return of capital. Reference: 12.1.4.1 in the License Exam. An accumulation unit in a variable annuity contract is: D) a minimum of 10 years of variable payments, followed by additional variable payments for life. IBM is a global brand and has its presence in 170 countries and operates . 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. D) reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. All of the following are characteristics of a variable annuity, except Herpes Zoster has all of the following characteristics except: A) Capital gains taxation on the earnings withdrawn in excess of the owner's basis. B) II and III. D)II and III. A) Money market fund. The client's investment objectives, tax bracket, investment experience and risk tolerance all align well with a VA recommendation. B)I and IV. A passion for serving customers and a personal commitment to following through in a dynamic, fast-paced environment. How to Navigate Market Volatility While Saving for Retirement, Variable Annuity: Definition and How It Works, Vs. A) periodic payment immediate annuity. The funds are not liquid due to the surrender fees, and there is also a 10% penalty on withdrawals before age 59-. The growth portion is taxed as ordinary income. A the safety of the principal invested B the yield is always higher than bond yields. A)Fixed annuities. Each of the remaining statements are true. For example, when paying rent, the rent payment (PMT) . Reference: 12.1.2 in the License Exam. The holder of a variable annuity receives the largest monthly payments under which of the following payout options? A variable annuity's separate account is: A) A variable annuity D) Variable Annuity. C)none of these. He makes the following four statements, all of which are true EXCEPT must precede every sales presentation. He makes the following four statements, all of which are true EXCEPT Variable annuities are designed to combat inflation risk. Distributed along a dermatome. Premiums made into the annuity purchase accumulation units. B) single payment deferred annuity. B)FINRA. b) What probability is the 20%20 \%20% mentioned above? D) I and IV Chapter 7: Annuities Flashcards | Quizlet What is her total tax liability? A) I and II. If the customer takes a withdrawal of $10,000, what are the tax consequences? If the contract holder dies before the period expires, the remaining payments are made to the beneficiary. Typically, they allow one withdrawal each year during the accumulation phase. All of the following are characteristics of Variable Annuity contracts EXCEPT The possibility of higher returns and greater income than fixed annuities, but there's also a risk that the account will fall in value A There are no surrender fees B Guaranteed death benefit C Tax deferred growth D Training Explanations A)2800. This compensation may impact how and where listings appear. D)partially a tax-free return of capital and partially taxable. A)equity funds. Her agent recommended she choose a variable annuity as a safe haven for the funds. C)Variable annuity contract with a discussion regarding interest rate risk a life insurance holder lives longer than expected. He makes several statements regarding the contract. Both products typically have a wide range of options across equities, bonds and money market instruments. have investment risk that is assumed by the investor Do whatever you want with a Learn About Annuities and Their Myths - F&G: fill, sign, print and send online instantly. Sub accounts and mutual funds are conceptually. 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. Expert Answer. A) variable payments for 10 years, followed by fixed payments for life. C) Mutual fund portfolio consisting of blue chip stocks Are Variable Annuities Subject to Required Minimum Distributions? D) Joint and last survivor annuity. 222. The downside was that the buyer was exposed to market risk, which could result in losses. We also reference original research from other reputable publishers where appropriate. A) III and IV. He originally invested $29,000 4 years ago; it now has a value of $39,000. A)not suitable Reference: 12.3.4 in the License Exam. B) the safety of the principal invested. Complete a blank sample electronically to save yourself time and money. For example, when paying rent, the rent payment (PMT) Instructions\textsf{\textcolor{#4257b2}{Instructions}}Instructions The number of annuity units becomes fixed when the contract is annuitized; it is the value of each unit that fluctuates. B)I and IV. \hspace{7pt} b. December 303030, to record the employers payroll taxes on the payroll to be paid on December 313131. 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. 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 Each of the remaining statements are true. An investor who purchases a fixed annuity contract assumes purchasing-power risk. C)I and III. The income was deferred from tax over the plan's life, so it is taxable as ordinary income once distributed. 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. have investment risk that is assumed by the investor *Once a variable annuity is annuitized, the accumulation units are converted into a fixed number of annuity units. A) two people are covered and payments continue until the second death. PDF Prudential IncomeFlex Target Vanguard Balanced Index Fund 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. You can buy an annuity with either a lump sum or a series of payments, and the accounts value will grow accordingly. The client's investment objectives, tax bracket, investment experience and risk tolerance all align well with a VA recommendation. D) reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. D) III and IV. C) early annuity phase-in the agent must be licensed in both insurance and securities. 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. A variable annuity is just a tax-deferred annuity in which you get to choose how the value of the annuity is invested. 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. 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. Only variable annuities have payout plans that provide the client income for life. 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) The fact that the annuity payment may increase or decrease. D) I and III. However, they are protected by state guaranty associations in the event that the insurance company providing the product goes out of business. If you need to withdraw money from the account because of a financial emergency, you may face surrender fees. A customer has an investment objective of keeping pace with inflation while assuming moderate risk. 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. The investor has already paid tax on the contributions but the earnings have grown tax-deferred. C)not suitable because a lifetime income rider is only for someone who is already retired D) Any time before the accumulation period. Guaranteed Lifetime Annuity: How They Work, When They Pay You, This is also generally true of retirement plans. B)fixed in value until the holder retires. 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. D) variable annuities may only be sold by registered representatives. 5 Q All of the following are characteristics of variable whole life EXCEPT the premium is level there is no guaranteed cash value there is no guaranteed minimum death benefit. a variable annuity does not guarantee payments for life. A) mortality guarantee. C) II and IV. Following the transition to T+1 in the U.S. markets, Commission staff will continue to work with industry leaders, public interest advocates, investors and other regulators to assess the future feasibility of a T+0 settlement standard cycle, and seek to identify ways to overcome the challenges associated with such a move, as articulated in the . Once the cost basis is reached, any further withdrawals are a nontaxable return of principal. 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. 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. Which of the following are defined as securities? 's dividend yield was % last year. Question #45 of 48Question ID: 606795 D) Capital gains tax on earnings exceeding basis. CH 7 Annuities Flashcards | Quizlet It is innate and universal. C)such an annuity is designed to combat inflation risk. For a retired person, which of the following investments would provide the greatest protection against inflation? Assuming that the payroll for the last week of the year is to be paid on January 444 of the following fiscal year, journalize the following entries: A) 2800. B)I and III. 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: Annuities | FINRA.org a variable annuity does not guarantee an earnings rate of return. How is the distribution taxed? The growth portion is taxed as ordinary income. C)III and IV a variable annuity guarantees payments for life. A) be paid to a designated beneficiary. C. It was a lump-sum purchase. Though its stated return might not be as high as the other choices potential returns, only a fixed annuity fits the objective and risk averse traits of this client. D)I and IV, Universal variable life policies are insurance company products that should be purchased primarily for the insurance features they offer rather than as an investment. Annuities due are a type of annuity where payments are made at the beginning of each payment period. The annuity unit's value represents a guaranteed return. The $30,000 contract value represents $10,000 of contributions and $20,000 of earnings. Based on this information the RR should: The accumulation period of a variable annuity may continue for many years. 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. U.S. Securities and Exchange Commission. Question #25 of 48Question ID: 606819 The earnings are taxable but the cost basis is returned tax free. C)II and III. The funds in an annuity are off-limits to creditors and other debt collectors. A customer has a nonqualified variable annuity. D)It cannot be determined until the April return is calculated. A client has purchased a nonqualified variable annuity from a commercial insurance company. D) I and III. Distributions from such an annuity are computed on a LIFO basis with the income taxed first. A) Ordinary income tax on earnings exceeding basis. Financial Sales Professional Job in Fort Worth, TX at New York Life Ideally they should be funded with readily available cash rather than using funds liquidated from existing investments. B) I and III. Investopedia does not include all offers available in the marketplace. B) Municipal bonds. How Are Nonqualified Variable Annuities Taxed? The entire amount is taxed as ordinary income. A variable annuity has two phases: an accumulation phase and a payout (annuitization) phase. With a fixed annuity, by contrast, the insurance company assumes the risk of delivering whatever return it has promised. Accumulation Period of Fixed Annuities During this period, premiums are credited with interest which accumulates on a yearly basis. A) Age 56, available cash to invest, makes the maximum retirement plan contributions to an existing IRA and 401(k) plan *Fixed income instruments, like bonds and fixed annuities, are subject to purchasing power risk. The value of accumulation and annuity units varies with the investment performance of the separate account. When a partial withdrawal is made from an annuity, the earnings are considered to be taken out first for tax purposes (or LIFO). Investopedia requires writers to use primary sources to support their work. Which of the following is not characteristic of a fixed annuity? B. During the . B)Capital gains taxation on the earnings withdrawn in excess of the owner's basis. C)I and IV. B)variable annuities are classified as insurance products. Contributions to an IRA may be tax deductible, depending on the individual's earnings and participation in a company-sponsored qualified retirement plan. A registered person recommends the purchase of a variable annuity to one of his clients. Distributions from nonqualified variable annuities are: Underlying equity investments T, age 70, withdraws cash from a profit-sharing plan and purchases a Straight Life Annuity. Your customer in his early 30s has received a modest inheritance from a relative. Question #36 of 48Question ID: 606805 A) a variable annuity contract will provide a fluctuating monthly check upon the annuitization of the contract Fixed Annuity, Retirement Annuities: Know the Pros and Cons. Once a customer annuitizes a variable annuity, which of the following statements are TRUE? A registered representative recommends a variable annuity with an income rider to a client. C)A 10% penalty plus the payment of ordinary income tax on all of the funds withdrawn. Therefore, variable annuities must be registered with the state insurance commission and the Securities and Exchange Commission. **Because common stocks are not fixed dollar investments, they have the opportunity to keep pace with inflation. In addition, if the customer is not at least 59-, there will be a tax penalty of an additional 10%. "Variable Annuities: What You Should Know," Page 6. In March, the actual net return to the separate account was 8%. *As contributions are made with after-tax dollars, only the earnings generated are taxed on withdrawal. continues payments only as long as all annuitants are still alive. *The accumulation period of a variable annuity may continue for many years. B)I and III. A) I and III. An Immediate Annuity is designed to provide each of the following features, EXCEPT: The creation of an estate. A. The AG49-A Revisions One of the following would achieve that objective but a suitability discussion regarding it's risk should also occur. 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. D) accumulation shares. Variable annuities provide protection from inflation because their monthly income can increase depending on the separate account's performance. A)II and IV. IBM is a global brand and has its presence in 170 countries and operates . C) Age 40, currently unemployed *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. An individual retirement annuity is an investment vehiclesimilar to an individual retirement accountthat is offered by insurance companies. B)4200. Ted's Bio; Fact Sheet; Hoja Informativa Del Ted Fund; Ted Fund Board 2021-22; 2021 Ted Fund Donors; Ted Fund Donors Over the Years. B) suitable if she has enough equity in the home to fund the variable annuity without cashing out the other VA contract Fixed annuities typically earn at a lower, stable rate. A 45-year-old investor takes a lump-sum distribution from a nonqualified variable annuity. Question #35 of 48Question ID: 606810 do not have a separate account What are the characteristics of fixed annuities? - InsuranceQnA A) Life-only annuity These contracts cover both lives and will continue to make payments until the last spouse dies. B) The death benefit cannot ever be more than the guaranteed benefit. C) 100% tax free. C)prime rate. are purchased primarily for their insurance features C) a variable annuity contract does not guarantee any type of return C)III and IV. Distribution can take place before or during any solicitation for sale. Your 65-year-old client owns a nonqualified variable annuity. Question #13 of 48Question ID: 606822 used for the investment of funds paid by contract holders. A)III and IV. a variable annuity does not guarantee payments for life. B) The entire $10,000 is taxable as ordinary income. 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. 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. The company's well-known Rock symbol is an icon of strength, stability, expertise and innovation that has stood the test of time. C)none of these. Question #43 of 48Question ID: 606809 A client has purchased a nonqualified variable annuity from a commercial insurance company. The owner of a variable annuity has all of the following rights EXCEPT D)Joint and last survivor annuity. Once annuitized, the number of annuity units does not vary. The value of the annuity units varies. B) The policyowner. Changes in payments on a variable annuity correspond most closely to fluctuations in the: Annuities are similar to other forms of investing in that the owner invests money with the hope that it will gain in value, but annuities also come with higher fees than most mutual funds. When a variable annuity contract is annuitized, the number of annuity units is fixed. As of March 03, 2023, had a relative dividend yield of % compared to the industry median of %. D) A 10% penalty plus the payment of ordinary income tax on funds withdrawn in excess of the owner's basis. B) variable annuities. The remainder of the premium is invested in the separate account. Variable annuity salespeople must be registered with FINRA and the state insurance department. D) each annuity unit's value varies with time, but the number of annuity units is fixed. An investor owning which of the following variable annuity contracts would hold accumulation units? C) the yield is always higher than bond yields. Here is how guaranteed lifetime annuities work. How to Rollover a Variable Annuity Into an IRA. D)the rate of return is determined by the underlying portfolio's value. A)the yield is always higher than mortgage yields. 6102.0.55.001 - Labour Statistics: Concepts, Sources and Methods, Dec 2005 Because the client is older than age 59-, he does not pay 10% premature distribution penalty tax. Consequently, the client pays taxes only on the growth portion of the withdrawal ($10,000). variable annuity without paying tax at the time of the transfer. \end{array} An accumulation unit in a variable annuity contract is: A) Fixed Annuity Transcribed image text: 6. "Variable Annuities: What You Should Know," Page 3. FINRA. B)Tax-free municipal bonds savingsbondsGroupinsurance$198,74451,71415,21030,42045,630$341,718, Tax rates assumed: "Variable Annuities: What You Should Know," Page 10. 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. Consequently, the client pays taxes only on the growth portion of the withdrawal ($10,000). B) value of annuity units. With regard to a variable annuity, all of the following may vary EXCEPT: The payout compared to last month's payout. The number of annuity units becomes fixed when the contract is annuitized; it is the value of each unit that fluctuates. Portfolio Compliance Risk Analyst Job in Newark, NJ at Prudential With variable annuities policyholders can choose from a number of investment opportunities. Then find the probability of the event. A variable annuity's separate account is: A separate account will invest in a number of different securities. *Only variable annuities have payout plans that provide the client income for life. If an investor has a fixed-annuity contract with an insurance company, which of the following risks is assumed by the investor? A 3 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. D) I and IV. A security is any investment for profit with management performed by a third party. Your 55-year-old client invested $50,000 four years ago in a nonqualified variable annuity. A) I and III. A)each annuity unit's value and the number of annuity units vary with time. Round to the nearest hundredth of a percent. Variable Annuity: Definition and How It Works, Vs. Fixed Annuity Lifetime vs. fixed period annuities do not have a separate account Question #26 of 48Question ID: 606811 In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. Can I Borrow from My Annuity for a House Down Payment? used to escrow late or otherwise delinquent premium payments. D)A variable annuity, Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. Sample problems from Chapter 9 . D)0. vote for the investment adviser. C) value of underlying securities held in the separate account. A) Fixed annuities. The paper publication will not be rereleased. Which 2 of the 4 client profiles would a VA be LEAST suitable for? 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. Final answer. 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. C) none of these. a variable annuity does not guarantee an earnings rate of return. C)II and IV. A) variable annuities offer the investor protection against capital loss. B) II and III. Variable annuities provide protection from inflation because their monthly income can increase depending on the separate account's performance. Reference: 12.2.1 in the License Exam. A) changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. A) The entire amount is taxed as ordinary income, because it is not life insurance. Variable annuity salespeople must register with all of the following EXCEPT: A) FINRA. Reference: 12.1.2 in the License Exam. Variable annuities are designed to combat inflation risk. The second phase is triggered when the annuity owner asks the insurer to start the flow of income, often referred to as the payout phase. B)Two-thirds of the withdrawal is taxable as ordinary income. The growth portion is taxed as a capital gain. The beneficiary is taxed at ordinary income rates during the year the lump sum is received. C) taxed as ordinary income only to the extent of earnings. B) 10% penalty plus payment of ordinary income tax on all funds withdrawn. C)the SEC. If the annuitant dies during the accumulation period, his/her beneficiary will receive the promised annuity payments. no. D) Life annuity with 10-year period certain. B)IRAs. Therefore only a fixed annuity could be considered as suitable. \hspace{10pt} \text{Warehouse salaries} & 110,000 & \hspace{10pt} \text{Social security tax withheld} & 51,714\\ B) IPO. B)II and III. 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) a minimum rate of return is guaranteed. Surrender fees and penalties for early withdrawal. *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. Question #37 of 48Question ID: 606817 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.
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