D) the payout plans provide the client income for life. Variable annuities are designed to combat inflation risk. Reference: 12.1.4.1 in the License Exam. The separate account performance compared to an assumed interest rate. There are two elements that contribute to the value of a variable annuity: the principal, which is the amount of money you pay into the annuity, and the returns that your annuitys underlying investments deliver on that principal over the course of time. Question #18 of 48Question ID: 606827 C) suggest to the client that perhaps a loan or refinancing his vacation home might be a better way to fund the contract purchase. III) A hierarchy of corporate staff evaluates divisions' plans and performance. D) II and IV. You can buy an annuity with either a lump sum or a series of payments, and the accounts value will grow accordingly. Which of the following is not a characteristic of a program module? A) mutual fund units. A)Fixed annuity contract with a discussion regarding purchasing power risk A) the investment portfolio is managed professionally. A)II and IV. an annuitant dies sooner than expected. John is the annuitant in a variable plan, and Sue is the beneficiary. B)Two-thirds of the withdrawal is taxable as ordinary income. C) II and III. An investor who purchases a fixed annuity contract assumes purchasing-power risk. Fixed annuities, on the other hand, provide a guaranteed return. B) Age 78, retired for 20 years, lives comfortably and wants to leave all liquid assets to children A) Any tax due is deferred. c) Construct a contingency table showing all the joint and marginal probabilities. Annuities due are a type of annuity where payments are made at the beginning of each payment period. B) the state insurance department. D)Variable annuity contract with a discussion regarding legislative risk, A VA with its investments in the separate account subject to market risk would not align with the customer's objective. C) number of accumulation units. Question #47 of 48Question ID: 606813 D) an accounting measure used to determine the contract owner's interest in the separate account. This factor is used to establish the dollar amount of the first annuity payment. A) Money market fund. All of the following statements regarding variable annuities are true EXCEPT: A) variable annuities offer the investor protection against capital loss. What will this transaction provide? Annual depreciation on the machine is$12,000, and the tax rate of the company is 25%. A) It will be higher. Question #42 of 48Question ID: 606830 A single lump-sum investment is made, and payments begin immediately, since the investor has purchased annuity units. B)mutual fund units. A) I and II. As part of his profile he stresses that he has had uncomfortable experiences in the past with the stock market and is not inclined to invest in anything that is based on stock market performance and would opt for principal protection instead. D) The investment risk is shared between the insurance company and the policyowner. IBM Noida, Uttar Pradesh, India1 month agoBe among the first 25 applicantsSee who IBM has hired for this roleNo longer accepting applications. 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. & \underline{\underline{\$1,014,000}} & \hspace{10pt} \text{U.S. savings bonds} & 30,420\\ a variable annuity guarantees payments for life. The distribution of questions by topic is not intended to represent the 39) A variable annuity has the following guarantees: [PDF] Understanding your variable annuity UBS Variable annuities are long-term investment vehicles that with these securities as well insurance company and do not apply to the investment B)a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero B) Exchange traded Funds (ETFs) or Exchange traded Notes (ETNs) A 3 B) fixed payments for 10 years, followed by variable payments for life. Reference: 12.3.2.4 in the License Exam. A) complete all paper work to purchase the annuity contract and obtain the clients signature immediately. D) I and IV. With a fixed annuity, by contrast, the insurance company assumes the risk of delivering whatever return it has promised. C) annuity units. Diagnosis is made by punch biopsy. A) mortality guarantee. Ideally they should be funded with readily available cash rather than using funds liquidated from existing investments. is required by the Securities Act of 1933. A) variable annuities offer the investor protection against capital loss. *As contributions are made with after-tax dollars, only the earnings generated are taxed on withdrawal. D) 4200. The features of variable deferred annuities are many. *Payments from a variable annuity depend on the securities' value in the separate account's underlying investment portfolio. A Variable Annuity has which of the following characteristics? I. Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Claudia Bienias Gilbertson, Debra Gentene, Mark W Lehman, Eric W. Noreen, Peter C. Brewer, Ray H Garrison. national origin, genetics, disability, age, veteran status, or any other characteristic protected by law. A trend is formed from non-repetitive actions of people. 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. B)unsuitable because her situation exposes her to surrender charges and early withdrawal penalties in exchange for insufficient benefits. Variable annuities are designed to combat inflation risk. The funds are not liquid due to the surrender fees, and there is also a 10% penalty on withdrawals before age 59-. no. C) such an annuity is designed to combat inflation risk. C) Unit refund life option The growth portion is taxed as a capital gain. The most popular type of variable annuity is a deferred annuity. 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. A client has purchased a nonqualified variable annuity from a commercial insurance company. \hspace{7pt} b. January 444, to record the employers payroll taxes on the payroll to be paid on January 444. Upon John's death during the accumulation period, Sue takes a lump-sum payment. Immediate life annuity with 10-year period certain. The value of accumulation and annuity units varies with the investment performance of the separate account. D) Joint and last survivor annuity. These contracts come with high surrender charges. B) payment guarantee. 's dividend yield was % last year. C) III and IV. The value of a variable annuity is based on the performance of an underlying portfolio of sub accounts selected by the annuity owner. The AG49-A Revisions Reference: 12.1.1 in the License Exam. D) I and IV. Variable Annuities. D) I and II. D) I 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)I and IV. Therefore, ordinary income taxes will apply to the entire $10,000. must be filed with FINRA. The upside was the possibility of higher returns during the accumulation phase and a larger income during the payout phase. Herpes Zoster has all of the following characteristics except: Group of answer choices. *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. The investor has already paid tax on the contributions but the earnings have grown tax-deferred. 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. This recommendation is: D) unsuitable because her situation exposes her to surrender charges and early withdrawal penalties in exchange for insufficient benefits. When the second party dies, all payments cease. have investment risk that is assumed by the investor Fixed Annuity, Retirement Annuities: Know the Pros and Cons. B) The proceeds minus John's cost basis taxed as ordinary income at Sue's tax rate. B) I and III. A) Capital gains taxation on the earnings withdrawn in excess of the owner's basis. D) periodic payment deferred annuity. *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. externalities. 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. a variable annuity guarantees an earnings rate of return. *A variable annuity payout is determined by comparing account performance with AIR, and this month's payout with last month's payout. Reference: 12.3.2.1 in the License Exam. variable An immediate annuity consists of a Single Premium T has an annuity that guarantees an income payment for the rest of his life. . C)Corporate bonds. 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. B)Capital gains taxation on the earnings withdrawn in excess of the owner's basis. With regard to a variable annuity, all of the following may vary EXCEPT: An individual retirement annuity is an investment vehiclesimilar to an individual retirement accountthat is offered by insurance companies. A) waiver of premium I. D) I and III. Supplemental income stream for retirement, not preservation of capital should be the catalyst to consider a VA and for anyone who may need access to the sum invested for any reason a VA would not be considered a suitable recommendation. B) II and III C) value of underlying securities held in the separate account. Reference: 12.3.2.1 in the License Exam. 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? D)accumulation units. C)not suitable because a lifetime income rider is only for someone who is already retired For example, if the income is monthly, the first payment comes one month after the immediate annuity is bought. C)I and III. A variable annuity is both an insurance and a securities product. *The owner of a life annuity with 10-year period certain will receive payments for life, subject to a minimum of 10 years. C) During the annuity period. 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. A) Ordinary income tax on earnings exceeding basis. He makes the following four statements, all of which are true EXCEPT D)separate account may consist of mutual funds. C)I and IV. The holder of a variable annuity receives the largest monthly payments under which of the following payout options? \hspace{10pt} Social security, 6%6\%6% on first $100,000\$100,000$100,000 of employee annual earnings The value of the annuity units is fixed. III. Here is how guaranteed lifetime annuities work. \hspace{7pt} b. December 303030, to record the employers payroll taxes on the payroll to be paid on December 313131. A guaranteed death benefit guarantees that the beneficiary will receive a death benefit if the annuitant dies before the annuity begins paying benefits. 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. This compensation may impact how and where listings appear. An 18-year-old, unmarried high school student sought a safe investment for a $30,000 bequest until after she graduated from college. D)A 10% penalty plus the payment of ordinary income tax on funds withdrawn in excess of the owner's basis. Salaries:SalessalariesWarehousesalariesOfficesalaries$670,000110,000234,000$1,014,000Deductions:IncometaxwithheldSocialsecuritytaxwithheldMedicaretaxwithheldU.S. Expert Answer. is required by the Securities Act of 1933. II. Therefore, ordinary income taxes will apply to the entire $10,000. Anthony Battle is a CERTIFIED FINANCIAL PLANNER professional. Therefore, variable annuities must be registered with the state insurance commission and the Securities and Exchange Commission. A) two people are covered and payments continue until the second death. This cloud model is composed of five essential characteristics, three service models, and four deployment models. Reference: 12.2.1 in the License Exam, Question #48 of 48Question ID: 606835 The accumulation unit's value is used to calculate the total value of the account. Annuity death benefits are generally paid in a lump sum. \hspace{10pt} \text{Sales salaries} & \$\hspace{5pt} 670,000 & \hspace{10pt} \text{Income tax withheld} & \$198,744\\ When the contract is annuitized, the annuitant is credited with a fixed number of annuity units. C) II and III. Designed to protect against inflation. A)equity funds. Variable annuities operate in similar ways to . B)I and III. PGIM Fixed Income, a division of PGIM Inc., an SEC-registered investment adviser and a business unit of Prudential Financial, Inc. is seeking a Portfolio Risk Surveillance Analyst. C) Tax-free municipal bonds *The investor has already paid tax on the contributions but the earnings have grown tax-deferred. approve changes in the plan portfolio. 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. 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. D) I and III. What is her total tax liability? Your 65-year-old client owns a nonqualified variable annuity. C) insurance companies keep variable annuity funds in separate accounts from other insurance products. An annuitant assumes the investment risk of a variable annuity and is not protected by the insurance company from capital losses. C) 3000. The $30,000 contract value represents $10,000 of contributions and $20,000 of earnings. A)variable annuities will protect an investor against capital loss. *BEST Suited for VA-Age 56, available cash to invest, maxes out IRA and 401(k) plan VA will be supplemental income, would not be suitable for cust. For a retired person, which of the following investments would provide the greatest protection against inflation? B)suitable regardless of funding sources the state banking commission. Distributed along a dermatome. an annuitant lives longer than expected. B) variable annuities. Since , has paid out quarterly dividends ranging from $0.00 to $0.00 per share. A)Joint tenants annuity. Over the past five years, 's dividend yield has averaged % per year. must precede every sales presentation. A) variable payments for 10 years, followed by fixed payments for life. B)I and IV. 222. A) partially a tax-free return of capital and partially taxable. B)each annuity unit's value varies with time, but the number of annuity units is fixed. C) the client assumes the investment risk. All of the following statements about variable annuities are true EXCEPT: Variable annuity salespeople must register with all of the following EXCEPT: A) FINRA. **Because common stocks are not fixed dollar investments, they have the opportunity to keep pace with inflation. Question #28 of 48Question ID: 606821 If an investor has purchased an immediate variable annuity, which of the following statements best describe the investment? A joint life with last survivor annuity: EEO IS THE LAW . On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity). An accumulation unit in a variable annuity contract is: *Insurance companies introduced the variable annuity as an opportunity to keep pace with inflation. Variable annuities gave buyers a chance to benefit from rising markets by investing in a menu of mutual funds offered by the insurer. This recommendation is: The fixed payment that the annuitant receives loses purchasing power over time as a result of inflation. The minimum guaranteed death benefit is provided by that portion of the payment invested in the insurance company's general account. Are Variable Annuities Subject to Required Minimum Distributions? C) IRAs. A) defined contribution plans. A) The entire amount is taxed as ordinary income, because it is not life insurance. are purchased primarily for their insurance features B) 10% penalty plus payment of ordinary income tax on all funds withdrawn. 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. continues payments only as long as all annuitants are still alive. A variable annuity is a security and must be registered with the SEC, not FINRA. Variable annuities should be considered long-term investments due to the limitations on withdrawals. D) I and III. A trend makes considerable influence or impact. Post navigation 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. B)a majority vote from the shareholders is required to change the investment objectives. "Variable Annuities: What You Should Know," Page 6. An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are. An annuity payment is the dollar amount of the equal periodic payment in an annuity environment. C) III and IV. A) a minimum rate of return is guaranteed. A client has purchased a nonqualified variable annuity from a commercial insurance company. A variable annuity is both an insurance and a securities product. Similarly, CDs are insured, thereby eliminating risk and guaranteeing a return. The money paid in will be returned tax free, but the earnings portion will be taxed as ordinary income. C) III and IV. If the customer takes a withdrawal of $10,000, what are the tax consequences? D) payments continue until age 70-. Reference: 12.3.3 in the License Exam. A prospectus for a variable annuity contract: 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. How Good of a Deal Is an Indexed Annuity? who needs access to the sum invested at later time. Which of the following are defined as securities? Fixed income instruments, like bonds and fixed annuities, are subject to purchasing power risk. D) I and II. B) Corporate debt securities C) with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed Reference: 12.2.1 in the License Exam. D) II and IV. required to be located off of the company's premises. C) II and IV. The income was deferred from tax over the plan's life, so it is taxable as ordinary income once distributed. Reference: 12.2.1 in the License Exam. A life with period certain contract guarantees payments for a specified number of years to a named beneficiary if the annuitant dies during that time. A) periodic payment immediate annuity. A passion for serving customers and a personal commitment to following through in a dynamic, fast-paced environment. A) two people are covered and payments continue until the second death. When may a variable annuity account be surrendered? D)variable annuities offer the investor protection against capital loss. A) Age 56, available cash to invest, makes the maximum retirement plan contributions to an existing IRA and 401(k) plan Once annuitized, the number of annuity units does not vary. Distribution of dividends occurs during the accumulation period. D) III and IV. a life insurance holder lives longer than expected. All of the following are accurate statements to make to the client EXCEPT There is no clear answer to this. C)prime rate. For example, when paying rent, the rent payment (PMT) . C) single payment immediate annuity. C) There is no tax as the withdrawal is considered return of capital. Since the client is older than 59 at the time of distribution, the additional 10% penalty tax is not incurred. D)A variable annuity, Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. This describes which of the following annuities? B)value of annuity units. A customer has an investment objective of keeping pace with inflation while assuming moderate risk. However, it does guarantee payments for life (mortality). How to Rollover a Variable Annuity Into an IRA. C) 100% tax free. used for the investment of funds paid by contract holders. II. C)II and IV. B)Variable annuities. A) mortality guarantee. b. Universal variable life policies \hspace{10pt} Medicare, 1.5%1.5\%1.5% D) Life annuity with 10-year period certain. Can I Borrow from My Annuity for a House Down Payment? A)the yield is always higher than mortgage yields. B) I and II. 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. Contributions to a nonqualified annuity are made with the owner's after-tax dollars. D) Two-thirds of the withdrawal is taxable as ordinary income. *Fixed income instruments, like bonds and fixed annuities, are subject to purchasing power risk. savingsbonds30,420Groupinsurance45,630$341,718\begin{array}{lrlr} B) variable annuities. A)an accounting measure used to determine the contract owner's interest in the separate account. 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) III and IV. A) Fixed Annuity A security is any investment for profit with management performed by a third party. C) II and III. Both products typically have a wide range of options across equities, bonds and money market instruments. When a variable annuity contract is annuitized, the number of annuity units is fixed. A registered representative's (RR) customer is speaking of a variable life insurance contract he owns. D) a minimum of 10 years of variable payments, followed by additional variable payments for life Universal variable life policies A customer has contributed $1,000 a year for 10 years to his tax-deferred nonqualified variable annuity. Over the following year, the stock fund has a 10% return, and the bond fund has a 5% return. B)IRAs. The amount taxed is the amount of the lump-sum payment minus the deceased's cost basis in the investment. The separate account is NOT likely to invest in: An important basic characteristic of common stocks that makes them a suitable type of investment for the separate account of variable annuities is: Her intent was to use the funds for the down payment on a house after graduation. Try A 45-year-old investor takes a lump-sum distribution from a nonqualified variable annuity. C) 3800. D)0. Reference: 12.2.1 in the License Exam. The value of the separate account is now $30,000. The beneficiary is taxed at ordinary income rates during the year the lump sum is received. C)annuity units. A variable annuity is just a tax-deferred annuity in which you get to choose how the value of the annuity is invested. Payments from a variable annuity depend on the securities' value in the separate account's underlying investment portfolio.
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