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D) II and III. The growth portion is taxed as a capital gain. I. the state insurance commission. C) Universal variable life policy. Anthony Battle is a CERTIFIED FINANCIAL PLANNER professional. C)such an annuity is designed to combat inflation risk. Variable annuities should be considered long-term investments due to the limitations on withdrawals. To comply with Regulation SP, a brokerage firm is required to do all of the following EXCEPT: A) deliver an annual notice of its information collecting and sharing policies to all customers. C) The portion of the premium invested in the insurance company's general account is used to provide for the minimum guaranteed amount of the death benefit. A) a variable annuity contract will provide a fluctuating monthly check upon the annuitization of the contract B) accumulation units. The number of annuity units becomes fixed when the contract is annuitized; it is the value of each unit that fluctuates. Variable annuity Which of the following is characteristic of fixed annuities? Complete a blank sample electronically to save yourself time and money. C) II and IV. "Variable Annuities: What You Should Know," Page 3. Based only on these facts, the variable annuity recommendation is A passion for serving customers and a personal commitment to following through in a dynamic, fast-paced environment. D)accumulation units. D) I and IV. A) a minimum rate of return is guaranteed. *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. D) be paid to the issuing company to complete the plan. If the annuitant dies during the accumulation period, his/her beneficiary will receive the promised annuity payments. D) I and IV Her agent recommended she choose a variable annuity as a safe haven for the funds. C) A 25year old public school teacher who would like to save enough for the purchase of her first home within the next 3 to 5 years. C) number of accumulation units. A) I and II. Single payment deferred annuity. The investor has already paid tax on the contributions but the earnings have grown tax-deferred. B) The death benefit cannot ever be more than the guaranteed benefit. Here is how guaranteed lifetime annuities work. Variable annuities offer the possibility of higher returns and greater income than fixed annuities, but theres also a risk that the account will fall in value. withdraw funds without any tax consequences. The funds are not liquid due to the surrender fees, and there is also a 10% penalty on withdrawals before age 59-. If the account is annuitized, the investor has chosen a payout option. Since the client is older than 59 at the time of distribution, the additional 10% penalty tax is not incurred. Reference: 12.2.1 in the License Exam. A)Purchasing power risk. D) III and IV. Each of the remaining statements are true. This chapter was updated on 15 December, 2005. D) 100% tax deferred. D)the safety of the principal invested. Question #40 of 48Question ID: 606800 The return on a variable annuity is not guaranteed; it is determined by the underlying portfolio's value. B) IPO. B) variable annuities. D) Growth mutual funds. B) II and III A) Fixed Annuity B) Municipal bonds. A) each annuity unit's value is fixed, but the number of annuity units varies with time. 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. Variable annuities gave buyers a chance to benefit from rising markets by investing in a menu of mutual funds offered by the insurer. a variable annuity guarantees payments for life. I. A) II and IV. The number of annuity units is fixed. The value of the separate account is now $30,000. C)II and IV. D)II and IV. What is the taxable consequence of this withdrawal to your client? B) payments continue until the death of the primary owner. *Contributions to a nonqualified annuity are made with the owner's after-tax dollars. Fixed income instruments, like bonds and fixed annuities, are subject to purchasing power risk. A variable annuity is both an insurance and a securities product. 2019 Ted Fund Donors None of the other investments listed here offer tax-deferred growth. Premiums made into the annuity purchase accumulation units. D) There is no guarantee regarding the investment results of the separate account. During the payout period, payments are based on a fixed number of annuity units established when the contract was annuitized. A fixed annuity is an insurance contract that pays a guaranteed rate of interest on the owner's contributions and later provides a guaranteed income. The value of the annuity units is fixed. The growth portion is subject to a 10% penalty. B)IRAs. 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. Fixed annuities, on the other hand, provide a guaranteed return. The most popular type of variable annuity is a deferred annuity. Which is it? C) II and IV. 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. When the contract is annuitized, the annuitant is credited with a fixed number of annuity units. *Payments from a variable annuity depend on the securities' value in the separate account's underlying investment portfolio. B) I and III. savingsbonds30,420Groupinsurance45,630$341,718\begin{array}{lrlr} D) Two-thirds of the withdrawal is taxable as ordinary income. As part of the registration requirements, a prospectus must be filed and distributed to prospective investors. D)all return of cost basis and nontaxable, Annuitized payments from a variable annuity are viewed for tax purposes as part earnings and part cost basis. No, annuities are not FDIC-insured as they are not bank products. . U.S. Securities and Exchange Commission. A) Ordinary income tax on earnings exceeding basis. When the second party dies, all payments cease. 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. D) periodic payment deferred annuity. d. Each month the payment will increase, decrease, or remain the same as the previous month's payment . c. The separate account provides for a guaranteed minimum return. For example, when paying rent, the rent payment (PMT) . His objective is monthly income that he can receive after he retires to supplement his small pension and social security benefits. *An immediate annuity has no accumulation period. A) mutual fund units. 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 B) The policyowner. Reference: 12.3.3 in the License Exam. This customer has no spouse or dependents, which negates the value of the death benefit. D) each annuity unit's value varies with time, but the number of annuity units is fixed. Fixed annuities typically earn at a lower, stable rate. D) value of accumulation units. When the contract is annuitized, the annuitant is credited with a fixed number of annuity units. B)reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. \end{array} *When money is deposited into the annuity, it is purchasing accumulation units. D)separate account may consist of mutual funds. no. When a variable annuity contract is annuitized, the number of annuity units is fixed. FINRA. The work environment characteristics are normal office conditions. The number of annuity units is fixed at the time of annuitization. D) The investment risk is shared between the insurance company and the policyowner. The wage for applicants for this position is $45,979.00 per year. *The investor has already paid tax on the contributions but the earnings have grown tax-deferred. Reference: 12.1.4.1 in the License Exam. Annuities due are a type of annuity where payments are made at the beginning of each payment period. Once the cost basis is reached, any further withdrawals are a nontaxable return of principal. It may be used by nongovernmental . Question #41 of 48Question ID: 606801 An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are. Investopedia requires writers to use primary sources to support their work. C) II and III. B) Life annuity. Because this is not guaranteed, the policyowner bears the investment 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. The earnings are taxable but the cost basis is returned tax free. However, because the client is not yet age 59- when making the withdrawal, he also pays a 10% penalty, or $1,000. b. Which 2 of the 4 client profiles would a VA be LEAST suitable for? Practice all cards. The most suitable option and one considered effective for married couples is a single joint and last survivor contract. He makes the following four statements, all of which are true EXCEPT When the first party dies, the annuity payment is made to the survivor. D)money market funds. C)the number of annuity units is fixed, and their value remains fixed. Which of the following is NOT an accurate statement concerning a variable life insurance contract? However, it does guarantee payments for life (mortality). must be filed with FINRA. Reasonable accommodations may be made to enable individuals with disabilities to perform the essential functions. B) During the accumulation period. D)I and III. *During the accumulation phase, the number of accumulation units will increase as additional money is invested. *A joint life with last survivor contract covers multiple annuitants and ceases payments at the death of the last surviving annuitant. On any device & OS. Because they have a separate account in which the investor assumes the investment risk, they can only be sold by individuals with both insurance and securities licenses. All of the following statements about variable annuities are true EXCEPT: must provide full and fair disclosure. D)II and III. A) two people are covered and payments continue until the second death. For this potential advantage, the investor, rather than the insurance company, assumes the investment risk. the agent must be licensed in both insurance and securities. Which of the following recommendations would best meet the customer profile? C) annuity units. D) not suitable because a lifetime income rider is only for someone who is already retired. The fees on variable annuities can be quite hefty. An annuitant assumes the investment risk of a variable annuity and is not protected by the insurance company from capital losses. How is the distribution taxed? With variable annuities policyholders can choose from a number of investment opportunities. C) value of underlying securities held in the separate account. What Are the Distribution Options for an Inherited Annuity? Question #12 of 48Question ID: 606814 The number of annuity units rises once annuitization begins. Consequently, the client pays taxes only on the growth portion of the withdrawal ($10,000). One of the following would achieve that objective but a suitability discussion regarding it's risk should also occur. *A periodic payment immediate annuity is a contradiction in terms. The amount taxed is the amount of the lump-sum payment minus the deceased's cost basis in the investment. Any withdrawals you make prior to the age of 59 may also be subject to a 10% tax penalty. A) A variable annuity 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. However, a discussion should occur regarding the risks that are associated with a fixed annuity; purchasing power risk. A) Dow Jones Industrial Average. A variable annuity is a type of annuity contract in which the value can vary based on the performance of an u . Post navigation A) the investment portfolio is managed professionally. C)number of accumulation units. The annuitant may not contribute and withdraw simultaneously. 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. Her intent was to use the funds for the down payment on a house after graduation. Contributions to a nonqualified variable annuity are not tax deductible. C)the yield is always higher than bond yields. who needs access to the sum invested at later time. C) III and IV. Securely download your document with other editable templates, any time, with PDFfiller. The growth portion is taxed as ordinary income. C)100% tax deferred. Reference: 12.3.2.4 in the License Exam. A)contact the issuer of the clients existing VA contract to facilitate the clients surrender of the contract. A variable annuity's separate account is: A separate account will invest in a number of different securities. When a partial withdrawal is made from an annuity, the earnings are considered to be taken out first for tax purposes (or LIFO). C)with guaranteed minimum withdrawal benefits (GMWBs) the periodic payments can be monthly, quarterly or annually D) Variable annuity. C) suitable regardless of funding sources If you die before the payout phase, your beneficiaries may receive a. The accumulation unit's value is used to calculate the total value of the account. 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. Question #33 of 48Question ID: 606832 a variable annuity guarantees an earnings rate of return. must precede every sales presentation. Question #45 of 48Question ID: 606795 But again, the need to designate beneficiaries is not an issue for this annuitant. D) I and III. B) 100% taxable. Immediate annuities purchase annuity units directly. Payments from a variable annuity depend on the securities' value in the separate account's underlying investment portfolio. B)a majority vote from the shareholders is required to change the investment objectives. When the second party dies, all payments cease. 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. Vaccine has decreased the incidence. Lifetime vs. fixed period annuities D) Keogh plans. Income that cannot be outlived by the owner There are also immediate annuities, which begin paying income right away. If the data is normally distributed with standard deviation$198, find the percent of vacationers who spent less than $1,200 per day. 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. However, if you take a withdrawal during the contractssurrender period, which can be as long as 15 years, youll generally have to pay a surrender fee. A) It will be higher. ($5,000) to a stock fund. An individual retirement annuity is an investment vehiclesimilar to an individual retirement accountthat is offered by insurance companies. Fixed annuities pay a fixed monthly benefit which loses purchasing power if there is inflation. A)variable annuities will protect an investor against capital loss. View full document. 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. Question #37 of 48Question ID: 606817 \hspace{10pt} \text{Warehouse salaries} & 110,000 & \hspace{10pt} \text{Social security tax withheld} & 51,714\\ B) The entire $10,000 is taxable as ordinary income. Question #46 of 48Question ID: 606796 A) The entire amount is taxed as ordinary income, because it is not life insurance. D) I and IV. B) single payment deferred annuity. 222. B) the client may vote for the board of directors or board of managers. an annuitant dies sooner than expected. Therefore only a fixed annuity could be considered as suitable. C)I and IV. Are There Penalties for Withdrawing Money From Annuities? The tax on this is $2,800 ($10,000 x 28%). Which of the following are defined as securities? D) I and III 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. They are more suitable for individuals who can fund the annuity with cash, want to supplement existing retirement benefits they have already funded, are comfortable with the market risk associated with a VA separate account portfolio and anticipate a long retirement. A) II and III. B) variable annuities. Question #32 of 48Question ID: 606815 Reference: 12.1.4.2 in the License Exam. *A variable annuity is a security and must be registered with the SEC, not FINRA. Question #26 of 48Question ID: 606811 All of the following are characteristics of a variable annuity, except: a. D)Dow Jones Industrial Average. The number of variable annuity accumulation units can rise during the accumulation period when additional units are being purchased. 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: Every annuity has some characteristics in common. What Are Ordinary Annuities, and How Do They Work (With Example)? Investopedia does not include all offers available in the marketplace. D) cost of living. The offers that appear in this table are from partnerships from which Investopedia receives compensation. C. 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: 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. 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: An important basic characteristic of common stocks that makes them a suitable type of investment for the separate account of variable annuities is: **Because common stocks are not fixed dollar investments, they have the opportunity to keep pace with inflation. C)The entire $10,000 is taxable as ordinary income. A)the yield is always higher than mortgage yields. D)0. D)variable annuities. d) What is the probability that a user is from the United States, given that he or she logs on every day? C) 10% penalty plus payment of ordinary income tax on all funds withdrawn exceeding basis. D) Life annuity with 10-year period certain. Your 55-year-old client invested $50,000 four years ago in a nonqualified variable annuity. A separate account will invest in a number of different securities. Reference: 12.1.2 in the License Exam. B) A 30 year old construction worker recently unemployed who wants to invest his severance pay amounting to 9 months salary. A)Fixed annuities. Fixed Annuity: A fixed annuity is a type of annuity contract that allows for the accumulation of capital on a tax-deferred basis. If an investor has a fixed-annuity contract with an insurance company, which of the following risks is assumed by the investor? I. In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. When the annuitization option is selected, each payment represents both capital and earnings. D)Investment risk. *Insurance companies introduced the variable annuity as an opportunity to keep pace with inflation. Variable annuities must be registered with: 10.1 This chapter addresses a number of ABS statistics relating to the economically active population which were not discussed elsewhere. C)Mortality risk. If the customer takes a withdrawal of $10,000, what are the tax consequences? Reference: 12.1.2 in the License Exam, Question #39 of 48Question ID: 721469