A) the investment portfolio is managed professionally. Which is it? B)Variable annuities. On an annual basis, the machine will produce 20,000 units with an expected selling price of $10, prime costs of$6 per unit, and a fixed cost allocation of $3 per unit. Reference: 12.1.2 in the License Exam. The number of annuity units is fixed. Job Classification: Corporate - Legal and Compliance. C)3800. When a partial withdrawal is made from an annuity, the earnings are considered to be taken out first for tax purposes (or LIFO). An 18-year-old, unmarried high school student sought a safe investment for a $30,000 bequest until after she graduated from college. Variable annuities must be registered with: *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. All of the following statements about variable annuities are true EXCEPT: A) not suitable A) Dow Jones Industrial Average. Determine the revenue equation given the profit and expense equations. Once annuitized, the number of annuity units does not vary. 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. D)It cannot be determined until the April return is calculated. Bear in mind that between the numerous feessuch as investment management fees,mortality fees, and administrative feesand charges for any additional riders, a variable annuitysexpenses can quickly add up. Because common stocks are not fixed dollar investments, they have the opportunity to keep pace with inflation. *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. D)A variable annuity, Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. B) be paid to any legal heirs as recognized by the annuitant's state of domicile. All of the following are true about annuities EXCEPT: they have all the same characteristics as life insurance. 2019 Ted Fund Donors 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. Annuities due are a type of annuity where payments are made at the beginning of each payment period. An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are Get Started. Consequently, the client pays taxes only on the growth portion of the withdrawal ($10,000). *A variable annuity may only be surrendered during the accumulation period. 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. C) During the annuity period. The accumulation period of a variable annuity may continue for many years. *Insurance companies introduced the variable annuity as an opportunity to keep pace with inflation. D)each annuity unit's value is fixed, but the number of annuity units varies with time. B)fixed in value until the holder retires. Variable annuities are riskier than fixed annuities because the underlying investments may lose value. In March, the actual net return to the separate account was 8%. a variable annuity guarantees payments for life. An annuity is an insurance product that promises to pay out income at a future date based on invested funds. D) There is no guarantee regarding the investment results of the separate account. However, they are protected by state guaranty associations in the event that the insurance company providing the product goes out of business. D) II and III. When the annuitization option is selected, each payment represents both capital and earnings. Investopedia requires writers to use primary sources to support their work. In March, the actual net return to the separate account was 8%. 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. *As contributions are made with after-tax dollars, only the earnings generated are taxed on withdrawal. C)the number of annuity units is fixed, and their value remains fixed. If the contract holder dies before the period expires, the remaining payments are made to the beneficiary. A customer has a nonqualified variable annuity. Variable annuity salespeople must register with all of the following EXCEPT: A) FINRA. D) the number of annuity units becomes fixed when the contract is annuitized. A)defined contribution plans. Reference: 12.3.1 in the License Exam, Question #30 of 48Question ID: 606833 Clusters of vesicles in various stages. C) IRAs. The figure below illustrates a six-month annuity with monthly payments. *VAs are less suitable for individuals who have not yet made maximum contributions to other retirement accounts such as IRAs and 401ks. III. D) III and IV. B) II and III. B) the number of annuity units is fixed, and their value remains fixed. As the name implies, the investment performance of a variable annuity's portfolio (separate account) can vary, and the investor bears the risk of any potential decline in its value. 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. \hspace{10pt} Federal unemployment (employer only), 0.8%0.8\%0.8%. If the data is normally distributed with standard deviation$198, find the percent of vacationers who spent less than $1,200 per day. A)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 A 45-year-old employed individual with no other retirement accounts in place Final answer. A) I and II. What is the taxable consequence of this withdrawal to your client? variable An immediate annuity consists of a Single Premium T has an annuity that guarantees an income payment for the rest of his life. Question #46 of 48Question ID: 606796 Of the four client profiles below which might be the best suited for a variable annuity recommendation? P=525p2+65,326p185,000E=326p+185,000P=-525 p^{2}+65,326 p-185,000 \quad E=-326 p+185,000P=525p2+65,326p185,000E=326p+185,000. D) 4200. B) The proceeds minus John's cost basis taxed as ordinary income at Sue's tax rate. B. D) 4500. *A variable annuity does not guarantee an earnings rate because earnings will depend on the performance of the separate account. B) I and II. If in the following year, the S&P 500 declined by 5%, the annuities value would remain at $107,000 because gains are locked in each year. I. An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are. Distribution of dividends occurs during the accumulation period. In a variable annuity contract, the provision that guarantees the annuitant payments for life is called the: A)exempt from taxes *The investor has already paid tax on the contributions but the earnings have grown tax-deferred. Home; About. e) Are From the United States and Log on every day independently? *Distributions from a nonqualified plan represent both a return of the original investment made in the plan with after-tax dollars (a nontaxable return of capital) and the income from that investment. \hspace{10pt} Social security, 6%6\%6% on first $100,000\$100,000$100,000 of employee annual earnings Post navigation Generally, a life-only contract pays the most per month because payments cease at the annuitant's death. covers more than one person. Vaccine has decreased the incidence. C)prime rate. II) It has an internal capital market wherein each division competes for funds. C) Universal variable life policy. Based on the information given in the question, the VA recommendation would not be suitable. A separate account will invest in a number of different securities. D)0. 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. If the contract holder dies before the period expires, the remaining payments are made to the beneficiary. If an investor has a fixed-annuity contract with an insurance company, which of the following risks is assumed by the investor? A)II and IV. D) expense guarantee. Round to the nearest hundredth of a percent. *Fixed income instruments, like bonds and fixed annuities, are subject to purchasing power risk. When the second party dies, all payments cease. D)an accounting measure used to determine payments to the owner of the variable annuity. B) taxed as ordinary income. Variable annuities provide protection from inflation because their monthly income can increase depending on the separate account's performance. 111. A)II and III. A) mortality guarantee. *Annuity death benefits are generally paid in a lump sum. *A variable annuity is a security and must be registered with the SEC, not FINRA. Given that all of the current retirement investments are subject to market risk, the customer wants these new funds to have no market risk exposure. 's dividend yield was % last year. B) prime rate. 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 A) taxed at a reduced rate. Which of the following statements regarding variable annuities are TRUE? 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: D) I and IV. B)Tax-free municipal bonds A variable annuity is a security and must be registered with the SEC, not FINRA. A)the state banking commission. When a variable annuity contract is annuitized, the number of annuity units is fixed. (The exception is the fixed income annuity, which has a moderate to high payout that rises as the annuitant ages). Refinancing a home to draw out equity has been identified by FINRA as an abusive sales tactic regarding the sales of VAs. A joint life with last survivor annuity: C)earnings only and taxable Among annuities, variable annuities differ from fixed annuities, which provide a specific and guaranteed return. Reference: 12.1.2 in the License Exam, Question #39 of 48Question ID: 721469 A) a minimum rate of return is guaranteed. Payments from a variable annuity depend on the securities' value in the separate account's underlying investment portfolio. 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? A guaranteed death benefit guarantees that the beneficiary will receive a death benefit if the annuitant dies before the annuity begins paying benefits. C. Deal with mathematic Math is all about solving equations and finding the right answer. *Under the mortality guarantee, the insurance company assumes mortality risk by guaranteeing payments for life, though the amount of each payment is not guaranteed. Periodic payments are not a consideration because normally the payments into an annuity are level or in a lump sum. Ideally they should be funded with readily available cash rather than using funds liquidated from existing investments. Variable annuities provide protection from inflation because their monthly income can increase depending on the separate account's performance. 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)the number of annuity units becomes fixed when the contract is annuitized. While a variable annuity has the benefit of tax-deferred growth, its annual expenses are likely to be much higher than the expenses of a typical mutual fund. A) I and II B) Life annuity with period certain B) fixed payments for 10 years, followed by variable payments for life. The most suitable option and one considered effective for married couples is a single joint and last survivor contract. IBM Noida, Uttar Pradesh, India4 weeks agoBe among the first 25 applicantsSee who IBM has hired for this roleNo longer accepting applications. Can I Borrow from My Annuity for a House Down Payment? However, at the end of the period certain the payments to the named beneficiary (the spouse) will stop. Your customer in his early 30s has received a modest inheritance from a relative. D)money market funds. Question #47 of 48Question ID: 606813 D) an accounting measure used to determine the contract owner's interest in the separate account. C) suitable regardless of funding sources 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. If your client, who is in the 28% tax bracket, makes a lump-sum withdrawal of $15,000, what tax liability results from the withdrawal? An annuitant assumes the investment risk of a variable annuity and is not protected by the insurance company from capital losses. "Variable Annuities: What You Should Know," Page 10. Complete a blank sample electronically to save yourself time and money. With variable annuities policyholders can choose from a number of investment opportunities. The investor has already paid tax on the contributions but the earnings have grown tax-deferred. Once the contract is annuitized, monthly payments to the customer are: A joint life with last survivor contract covers multiple annuitants and ceases payments at the death of the last surviving annuitant. B) II and IV. The features of variable deferred annuities are many. Each of the remaining statements are true. 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. However, it does guarantee payments for life (mortality). A security is any investment for profit with management performed by a third party. All of the following statements regarding variable annuities are true EXCEPT: For a retired person, which of the following investments would provide the greatest protection against inflation? C) Corporate bonds. Typically, they allow one withdrawal each year during the accumulation phase. The earnings are taxable but the cost basis is returned tax free. *Funding a VA contract by cashing out either life insurance policies or existing VA contracts, especially those held for a short period of time is not suitable. A) Ordinary income tax on earnings exceeding basis. Are Variable Annuities Subject to Required Minimum Distributions? The value of the annuity units is fixed. national origin, genetics, disability, age, veteran status, or any other characteristic protected by law. D)I and II. An accumulation unit in a variable annuity contract is: A guaranteed lifetime annuity promises to pay the owner an income for the rest of their life. B)mutual fund units. Annuity units are units of ownership when the contract is in the payout stage. 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. A) variable payments for 10 years, followed by fixed payments for life. Accumulation Period of Fixed Annuities During this period, premiums are credited with interest which accumulates on a yearly basis. Listing tax-deferred growth as an objective for retirement income, which of the following investments is most suitable? D)accumulation units. If the customer takes a withdrawal of $10,000, what are the tax consequences? Immediate annuities purchase annuity units directly. A) The policy provides a minimum guaranteed death benefit. 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. D) the yield is always higher than mortgage yields. A customer has an investment objective of keeping pace with inflation while assuming moderate risk. Single payment deferred annuity. B) The investor's marital status. D) Variable Annuity. An investor owning which of the following variable annuity contracts would hold accumulation units? Based only on these facts, the variable annuity recommendation is C)III and IV Reference: 12.2.1 in the License Exam. On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity). The annuity unit's value represents a guaranteed return. A) Life-only annuity Life with period certain will produce a smaller check for life because the insurance company will guarantee payments to a beneficiary for a certain period of time designated in the contract should the annuitant die within that period. During the . A joint-and-last-survivor annuity is a payout option where: For example, when paying rent, the rent payment (PMT) . 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. do not have a separate account B)Two-thirds of the withdrawal is taxable as ordinary income. 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. About Us B)suitable regardless of funding sources An accumulation unit in a variable annuity contract is: 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. . It may be used by nongovernmental . None of the other investments listed here offer tax-deferred growth. The annuitant may not contribute and withdraw simultaneously. Reference: 12.3.1 in the License Exam. 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. Of the answer choices given the best would be to reevaluate the recommendation based on the new information tendered by the client. "Variable Annuities: What You Should Know," Pages 67. A) waiver of premium 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. The work environment characteristics are normal office conditions. Table1. They offer broad diversification in the securities market and potential growth, all while using the power of tax deferral. Which of the following recommendations would best meet the customer profile? The number of annuity units becomes fixed when the contract is annuitized; it is the value of each unit that fluctuates. Skylar Clarine is a fact-checker and expert in personal finance with a range of experience including veterinary technology and film studies. The number of annuity units is fixed at the time of annuitization. D) I and IV. How Are Nonqualified Variable Annuities Taxed? We also reference original research from other reputable publishers where appropriate. The value of the customer's account is converted into annuity units if and when the customer decides to annuitize the contract. A) complete all paper work to purchase the annuity contract and obtain the clients signature immediately. *A joint life with last survivor contract covers multiple annuitants and ceases payments at the death of the last surviving annuitant. *The return on a variable annuity is not guaranteed; it is determined by the underlying portfolio's value. D)I and III. B) The death benefit cannot ever be more than the guaranteed benefit. Withdrawals from a nonqualified variable annuity are made on a LIFO basis, so the taxable earnings are considered taken out before principal. A) III and IV. Question #37 of 48Question ID: 606817 Expert Answer. A 45-year-old investor takes a lump-sum distribution from a nonqualified variable annuity. A 10% penalty applies only if distributions begin before age 59-. C)not suitable because a lifetime income rider is only for someone who is already retired The largest monthly check an annuitant can receive for the rest of his life is generated by a straight life (life income or life only) payout option. A) The entire amount is taxed as ordinary income, because it is not life insurance. Based only on these facts, the variable annuity recommendation is His objective is monthly income that he can receive after he retires to supplement his small pension and social security benefits. The funds are not liquid due to the surrender fees, and there is also a 10% penalty on withdrawals before age 59-. It is the starting point of motivation because they generate emotions. Annuity death benefits are generally paid in a lump sum. C) none of these. This would not align with the couple's criteria for coverage as long as they both live. *Contributions to a nonqualified annuity are made with the owner's after-tax dollars. How does an indexed annuity differ from a fixed annuity? D) I and III 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 Variable Annuity has which of the following characteristics? She may choose to receive monthly payments for the rest of her life. A)III and IV. Question #26 of 48Question ID: 606811 A) Capital gains taxation on the earnings withdrawn in excess of the owner's basis. b. No, annuities are not FDIC-insured as they are not bank products. The money paid in will be returned tax free, but the earnings portion will be taxed as ordinary income. Because the client is older than age 59-, he does not pay 10% premature distribution penalty tax. D)suggest to the client that perhaps a loan or refinancing his vacation home might be a better way to fund the contract purchase. Variable annuity salespeople must register with all of the following EXCEPT: Which of the following are defined as securities? 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. an annuitant lives longer than expected. A prospectus for a variable annuity contract: Variable annuities involve underlying equity investments in a separate account. A) II and IV. Suppose that 20%20 \%20% of their users are United States users who log on daily. C)It will be higher. a. The annuity unit's value represents a guaranteed return. An investor who has purchased a nonqualified variable annuity has the right to: It's somewhat similar to a variable life insurance policy in that: You can choose how the product's value is invested. A registered representative explaining variable annuities to a customer would be CORRECT in stating that: Since the client is older than 59 at the time of distribution, the additional 10% penalty tax is not incurred. C) a variable annuity contract does not guarantee any type of return 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. C) Mutual fund portfolio consisting of blue chip stocks C) annuity units. D) periodic payment deferred annuity. B) II and IV. Registration with FINRA is de facto registration with the SEC; no registration is required by the state banking commission. In addition, if the customer is not at least 59-, there will be a tax penalty of an additional 10%. 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. A rider or statement of condition that allows a variable life insured to maintain policy coverage after becoming disabled is a benefit known as 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. The $30,000 contract value represents $10,000 of contributions and $20,000 of earnings. C) III and IV. Anthony Battle is a CERTIFIED FINANCIAL PLANNER professional. The most popular type of variable annuity is a deferred annuity. There are two interest rates under fixed annuities. The following changes have been incorporated into Special Publication 800145, as of the date indicated - . The holder of a variable annuity receives the largest monthly payments under which of the following payout options? *Variable annuity contracts were devised to help investors keep pace with inflation. B) It will be lower. A) A variable annuity the SEC. A registered representative recommends a variable annuity with an income rider to a client. A)There is no tax as the withdrawal is considered return of capital. The growth portion is taxed as ordinary income. ($5,000) to a stock fund. A variable annuity is just a tax-deferred annuity in which you get to choose how the value of the annuity is invested. C) III and IV The owner of a life annuity with 10-year period certain will receive payments for life, subject to a minimum of 10 years. 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. This guideline has been prepared for use by Federal agencies. A) Only during the payout period. B)changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. Herpes Zoster has all of the following characteristics except: Group of answer choices. C) insurance guarantee. The client agrees to purchase the contract and informs the RR that he will be cashing out a VA he purchased 2 years ago to fund the new contract and will forward the check as soon as he receives it. The $30,000 contract value represents $10,000 of contributions and $20,000 of earnings. A) number of annuity units. . Random withdrawals do not guarantee how long the money will last because large withdrawals can deplete the funds before the annuitant dies. Variable annuities were introduced in the 1950s as an alternative to fixed annuities, which offer a guaranteedbut often lowpayout during the annuitization phase. The remainder of the premium is invested in the separate account. IV. U.S. Securities and Exchange Commission. If an investor has purchased an immediate variable annuity, which of the following statements best describe the investment? 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. savingsbondsGroupinsurance$198,74451,71415,21030,42045,630$341,718, Tax rates assumed: They can be classified by: Nature of the underlying investment - fixed or variable In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. C) II and IV. B) During the accumulation period. Life income riders are best suited for those who anticipate a lengthy retirement and are generally not yet retired when making the VA purchase. Immediate life annuity with 10-year period certain. All of the following are accurate statements to make to the client EXCEPT If your customer invests in a variable annuity and chooses to annuitize at age 65, which of the following statements are TRUE? If an insurance holder dies sooner than expected, the insurance company will have to pay the death benefit sooner. Fixed annuities are not considered securities as return is guaranteed by the insurance company issuer. 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. PGIM Fixed Income has over $900 billion in assets under management across a broad array of fixed . Designed to protect against inflation. B)a minimum rate of return is guaranteed. She may choose to receive monthly payments for the rest of her life. Reference: 12.1.4 in the License Exam. You can learn more about the standards we follow in producing accurate, unbiased content in our. Which of the following is NOT an accurate statement concerning a variable life insurance contract?
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