Question #22 of 48Question ID: 606803 A) 2800. A 45-year-old employed individual with no other retirement accounts in place The annuity unit's value represents a guaranteed return. C)The entire $10,000 is taxable as ordinary income. B)It will be lower. D)Municipal bonds. A) a minimum rate of return is guaranteed. C) the yield is always higher than bond yields. This cloud model is composed of five essential characteristics, three service models, and four deployment models. C) the client assumes the investment risk. She will receive the annuity's entire value in a lump-sum payment. In a variable annuity contract, the provision that guarantees the annuitant payments for life is called the: A) I and II Reference: 12.1.2.1.2 in the License Exam. A)I and IV. This factor is used to establish the dollar amount of the first annuity payment. The following changes have been incorporated into Special Publication 800145, as of the date indicated - . *The investor has already paid tax on the contributions but the earnings have grown tax-deferred. The separate account performance compared to an assumed interest rate. Question #45 of 48Question ID: 606795 You purchase a variable annuity contract by making either a single purchase payment or a series of purchase payments. 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. A) each annuity unit's value is fixed, but the number of annuity units varies with time. It is the starting point of motivation because they generate emotions. Contributions to an IRA may be tax deductible, depending on the individual's earnings and participation in a company-sponsored qualified retirement plan. B)each annuity unit's value varies with time, but the number of annuity units is fixed. How to Rollover a Variable Annuity Into an IRA. 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. Your 65-year-old client owns a nonqualified variable annuity. C)Life annuity. Nicks Enterprises has purchased a new machine tool that will allow the company to improve the efficiency of its operations. Do whatever you want with a Learn About Annuities and Their Myths - F&G: fill, sign, print and send online instantly. D) accumulation shares. Are There Penalties for Withdrawing Money From Annuities? 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. C)I and IV. *A joint life with last survivor contract covers multiple annuitants and ceases payments at the death of the last surviving annuitant. *The accumulation period of a variable annuity may continue for many years. C) The investor's concerns about taxes. 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. Reference: 12.3.1 in the License Exam, Question #30 of 48Question ID: 606833 C) with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed The holder of a variable annuity receives the largest monthly payments under which of the following payout options? However, a discussion should occur regarding the risks that are associated with a fixed annuity; purchasing power risk. Investopedia does not include all offers available in the marketplace. The holder of a variable annuity receives the largest monthly payments under which of the following payout options? Question #37 of 48Question ID: 606817 The number of annuity units is fixed at the time of annuitization. U.S. Securities and Exchange Commission. D) value of accumulation units. B) I and IV. A) periodic payment immediate annuity. 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. Question #43 of 48Question ID: 606809 C) insurance guarantee. Variable annuities provide protection from inflation because their monthly income can increase depending on the separate account's performance. A) number of annuity units. A) It will be higher. 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. These contracts cover both lives and will continue to make payments until the last spouse dies. What is the taxable consequence of this withdrawal to your client? D) the payout plans provide the client income for life. Annuity death benefits are generally paid in a lump sum. 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 accumulation phase, the number of accumulation units will increase as additional money is invested. A) The fact that the annuity payment may increase or decrease. Round to the nearest hundredth of a percentile. A)II and III Over the past five years, 's dividend yield has averaged % per year. C) taxed as ordinary income only to the extent of earnings. II. *The return on a variable annuity is not guaranteed; it is determined by the underlying portfolio's value. Suggesting that loans or drawing equity from a home to fund VA contracts have also been targeted as abusive sales practices. *Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. Reference: 12.3.3 in the License Exam. The company's well-known Rock symbol is an icon of strength, stability, expertise and innovation that has stood the test of time. Variable annuities are designed to combat inflation risk. A registered person recommends the purchase of a variable annuity to one of his clients. There is no clear answer to this. Facebook reports that 70%70 \%70% of their users are from outside the United States and that 50%50 \%50% of their users log on to Facebook daily. C) III and IV Once annuitized, the number of annuity units does not vary. A) complete all paper work to purchase the annuity contract and obtain the clients signature immediately. B)variable annuities are classified as insurance products. Refinancing a home to draw out equity has been identified by FINRA as an abusive sales tactic regarding the sales of VAs. savingsbonds30,420Groupinsurance45,630$341,718\begin{array}{lrlr} *Only variable annuities have payout plans that provide the client income for life. A rider or statement of condition that allows a variable life insured to maintain policy coverage after becoming disabled is a benefit known as Based on this information the RR should: 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. *VAs are less suitable for individuals who have not yet made maximum contributions to other retirement accounts such as IRAs and 401ks. Once annuitized, the number of annuity units does not vary. Based on the information given in the question, the VA recommendation would not be suitable. e) Are From the United States and Log on every day independently? C)earnings only and taxable All of the following statements regarding variable annuities are true EXCEPT: B)Tax-free municipal bonds A)variable annuities will protect an investor against capital loss. You can learn more about the standards we follow in producing accurate, unbiased content in our. Annuities due are a type of annuity where payments are made at the beginning of each payment period. B) the state insurance department. A)the state banking commission. A) a variable annuity contract will provide a fluctuating monthly check upon the annuitization of the contract B) a variable annuity contract is not required to be sold by prospectus because it is an insurance contract A prospectus for a variable annuity contract: The tax on this amount is $3,000. For an insurance company, mortality risk turns out unfavorably if: Changes in payments on a variable annuity correspond most closely to fluctuations in the: D) a minimum of 10 years of variable payments, followed by additional variable payments for life. A) partially a tax-free return of capital and partially taxable. B) 0. C) early annuity phase-in A) I and IV. Reference: 12.2.1 in the License Exam, Question #48 of 48Question ID: 606835 D) The investment risk is shared between the insurance company and the policyowner. A registered representative explaining variable annuities to a customer would be CORRECT in stating that: The growth portion is taxed as a capital gain. Practice all cards. D)separate account may consist of mutual funds. A variable annuity has two phases: an accumulation phase and a payout (annuitization) phase. C) II and IV. The growth portion is taxed as ordinary income. Fixed annuities are not considered securities as return is guaranteed by the insurance company issuer. What is the taxable consequence of this withdrawal to your client? B) The death benefit cannot ever be more than the guaranteed benefit. The funds in an annuity are off-limits to creditors and other debt collectors. When the second party dies, all payments cease. Fixed Annuity: A fixed annuity is a type of annuity contract that allows for the accumulation of capital on a tax-deferred basis. Question #13 of 48Question ID: 606822 D) the number of annuity units becomes fixed when the contract is annuitized. A)each annuity unit's value and the number of annuity units vary with time. Question #31 of 48Question ID: 606836 Many variable annuities invest the separate account in mutual funds. 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? Question #26 of 48Question ID: 606811 Income that cannot be outlived by the owner Periodic payment deferred annuity. Reference: 12.3.1 in the License Exam. B) taxed as ordinary income. If you die before the payout phase, your beneficiaries may receive a. Distributed along a dermatome. D)accumulation units. The value of the annuity units is fixed. D) 100% tax deferred. used to escrow late or otherwise delinquent premium payments. It was a lump-sum purchase. C)II and IV. D)I and III. vote on proposed changes in investment policy. C) A 10% penalty plus the payment of ordinary income tax on all of the funds withdrawn. "Variable Annuities: What You Should Know," Pages 67. Question #28 of 48Question ID: 606821 A 58-year-old individual near retirement who is in good health and anticipates a lengthy retirement The return on a variable annuity is not guaranteed; it is determined by the underlying portfolio's value. B) the rate of return is determined by the underlying portfolio's value. D)suitable if she has enough equity in the home to fund the variable annuity without cashing out the other VA contract, Based on the information given in the question, the VA recommendation would not be suitable. Upon John's death during the accumulation period, Sue takes a lump-sum payment. Fixed Annuity, Retirement Annuities: Know the Pros and Cons. Question #20 of 48Question ID: 606808 A customer is receiving annuitized payments from a variable annuity. B)part earnings and part cost basis Reference: 12.1.2 in the License Exam. must provide full and fair disclosure. a variable annuity guarantees an earnings rate of return. Of the answer choices given the best would be to reevaluate the recommendation based on the new information tendered by the client. With variable annuities policyholders can choose from a number of investment opportunities. Payments from a variable annuity depend on the securities' value in the separate account's underlying investment portfolio. The original investment has grown to a value of $60,000. D) II and III. B)I and IV. The earnings on dollars invested into a variable annuity accumulate tax deferred, which is why variable annuities are popular products for retirement accumulation. Describe. have investment risk that is assumed by the investor (primary needs). You can buy an annuity with either a lump sum or a series of payments, and the accounts value will grow accordingly. C. 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. A) variable annuities offer the investor protection against capital loss. What Are the Distribution Options for an Inherited Annuity? d. Each month the payment will increase, decrease, or remain the same as the previous month's payment . Reference: 12.3.3 in the License Exam. *The customer, in the accumulation stage of the annuity, is holding accumulation units. A registered representative recommends a variable annuity with an income rider to a client. An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are. C) It will stay the same. When may a variable annuity account be surrendered? D) I and III. A) 4000. B)suitable regardless of funding sources An Immediate Annuity is designed to provide each of the following features, EXCEPT: The creation of an estate. Do homework Doing homework can help you learn and understand the material covered in class. On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity). Life income riders are best suited for those who anticipate a lengthy retirement and are generally not yet retired when making the VA purchase. A) Fixed annuities. But again, the need to designate beneficiaries is not an issue for this annuitant. For a retired person, which of the following investments would provide the greatest protection against inflation? Most annuities will not allow you to withdraw additional funds from the account once the payout phase has begun. A)Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. A Variable Annuity has which of the following characteristics? Universal variable life policies For example, if the income is monthly, the first payment comes one month after the immediate annuity is bought. When the annuitization option is selected, each payment represents both capital and earnings. A) periodic payment immediate annuity. Her intent was to use the funds for the down payment on a house after graduation. Variable Annuity Advantages and Disadvantages, Guide to Annuities: What They Are, Types, and How They Work. C)3800. Though there is no beneficiary designation during the annuitization, this is not an issue for this annuitant. 8 annuities provide a guaranteed rate of return, whereas annuities provide conservative to aggressive investments whose rates of return are not guaranteed. *Annuity death benefits are generally paid in a lump sum. The separate account is used for both variable life insurance and variable annuity investments. *Of the four customer profiles the individual already making the maximum retirement account contributions available to him and wanting to minimize the tax consequences of being in a high income tax bracket would be most suitable for a VA recommendation. An important basic characteristic of common stocks that makes them a suitable type of investment for the separate account of variable annuities is: A) Fixed Annuity Which Earns More: Variable or Fixed Annuities? A variable annuity is a tax-deferred retirement vehicle that allows you to choose from a selection of investments and then pays you a level of income in retirement that is determined by the performance of the investments you choose. Sample problems from Chapter 9 . When a partial withdrawal is made from an annuity, the earnings are considered to be taken out first for tax purposes (or LIFO). A customer has a nonqualified variable annuity. D) each annuity unit's value varies with time, but the number of annuity units is fixed. 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. A)equity funds. 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. 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: C) single payment immediate annuity. Of the four client profiles below which might be the best suited for a variable annuity recommendation? B) single payment deferred annuity. How does an indexed annuity differ from a fixed annuity? *A variable annuity may only be surrendered during the accumulation period. Once a customer annuitizes a variable annuity, which of the following statements are TRUE? B)I and III. Deferred Annuity Definition, Types, How They Work, What Is a Fixed Annuity? D)It cannot be determined until the April return is calculated. A) 2800. If the owner of a variable annuity dies during the accumulation period, any death benefit will: C)the yield is always higher than bond yields. He earned the Chartered Financial Consultant designation for advanced financial planning, the Chartered Life Underwriter designation for advanced insurance specialization, the Accredited Financial Counselor for Financial Counseling and both the Retirement Income Certified Professional, and Certified Retirement Counselor designations for advance retirement planning. The figure below illustrates a six-month annuity with monthly payments. A universal variable life policy should be purchased primarily for its insurance features, not its investment features. D) III and IV. D)partially a tax-free return of capital and partially taxable. Anthony Battle is a CERTIFIED FINANCIAL PLANNER professional. Listing tax-deferred growth as an objective for retirement income, which of the following investments is most suitable? Question #33 of 48Question ID: 606832 A registered representative recommends a variable annuity with an income rider to a client. A joint-and-last-survivor annuity is a payout option where: A) taxed at a reduced rate. She may choose to receive monthly payments for the rest of her life. is required by the Securities Act of 1933. D) reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. 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. 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. 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. Single payment deferred annuity. B) II and IV. This recommendation is: D) unsuitable because her situation exposes her to surrender charges and early withdrawal penalties in exchange for insufficient benefits. This would not align with the couple's criteria for coverage as long as they both live. Similarly, CDs are insured, thereby eliminating risk and guaranteeing a return. While variable annuities have greater potential for earnings, since their interest rate rises and falls with their underlying investments, they can lose money. B) 0. The creation of an estate. *Insurance companies introduced the variable annuity as an opportunity to keep pace with inflation. A)value of underlying securities held in the separate account. Guaranteed Lifetime Annuity: How They Work, When They Pay You, This is also generally true of retirement plans. If this client is in the payout phase, how would his April payment compare to his March payment? C) III and IV. D) I and III D)I and II. \text{Salaries:} && \text{Deductions:}\\ Reference: 12.3.4 in the License Exam. 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. Premiums made into the annuity purchase accumulation units. A)II and IV. C) II and IV. C)with guaranteed minimum withdrawal benefits (GMWBs) the periodic payments can be monthly, quarterly or annually A client has purchased a nonqualified variable annuity from a commercial insurance company. 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. The number of accumulation units is always fixed throughout the accumulation period. Prudential's businesses offer a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds, asset management, and real estate services. Round to the nearest hundredth of a percent. 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. B)I and III. In March, the actual net return to the separate account was 8%. D) It cannot be determined until the April return is calculated. B) The death benefit cannot ever be more than the guaranteed benefit. In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. All of the following are true about annuities EXCEPT: they have all the same characteristics as life insurance. A)There is no tax as the withdrawal is considered return of capital. In a variable life annuity with 10-year period certain, a contract holder receives: C)complete all paper work to purchase the annuity contract and obtain the clients signature immediately. 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) waiver of premium D) I and IV. 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. B) The policyowner. (The exception is the fixed income annuity, which has a moderate to high payout that rises as the annuitant ages). Variable annuity salespeople must be registered with FINRA and the state insurance department. B)I and IV. a variable annuity guarantees payments for life. If your customer invests in a variable annuity and chooses to annuitize at age 65, which of the following statements are TRUE? C) There is no tax as the withdrawal is considered return of capital. This guideline has been prepared for use by Federal agencies. This chapter was updated on 15 December, 2005. A)II and IV. Which of the following recommendations would best meet the customer profile? A) Only during the payout period. D)II and III. The most popular type of variable annuity is a deferred annuity. Therefore only a fixed annuity could be considered as suitable. The beneficiary is taxed at ordinary income rates during the year the lump sum is received. A)100% tax free. Listing tax-deferred growth as an objective for retirement income, which of the following investments is most suitable? A)IPO. D)I and IV. A)variable annuities may only be sold by registered representatives. Distributions from nonqualified variable annuities are: The value of the separate account is now $30,000. D) Joint and last survivor annuity. B) II and III B)a minimum rate of return is guaranteed. b. For example, when paying rent, the rent payment (PMT) Salaries:SalessalariesWarehousesalariesOfficesalaries$670,000110,000234,000$1,014,000Deductions:IncometaxwithheldSocialsecuritytaxwithheldMedicaretaxwithheldU.S. IV. IV. All of the following characteristics are shared by both a mutual fund and a variable annuity's separate account EXCEPT: B) IPO. The noble relatives of the Count d'Horn absolutely blocked up the ante-chambers of the regent, praying for mercy on the misguided youth, and alleging that he was insane . Variable annuities are designed to combat inflation risk. B) II and III B)Life annuity with period certain. The remainder of the premium is invested in the separate account. Your client owns a variable annuity contract with an AIR of 4%. No, annuities are not FDIC-insured as they are not bank products. The growth portion is taxed as ordinary income. B) accumulation units. B)II and III. guarantees payments for a certain period of time. *An immediate annuity has no accumulation period. 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 value of these units varies with the performance of the separate account. a. A) 4000. B) II and III. The accumulation unit's value is used to calculate the total value of the account. An annuity is an insurance product that promises to pay out income at a future date based on invested funds. An example would be if a life annuity with 10-year period certain contract holder died after 5 years, payments would continue for 5 more years to the beneficiary and then stop. A) defined contribution plans. In March, the actual net return to the separate account was 8%. are purchased primarily for their insurance features an annuitant lives longer than expected. When the annuitization option is selected, each payment represents both capital and earnings. national origin, genetics, disability, age, veteran status, or any other characteristic protected by law. The separate account is NOT likely to invest in: Her intent was to use the funds for the down payment on a house after graduation. Determine whether the following events are independent or dependent. Dividing the funds available so as to fund 2 separate contracts, whether they be joint with last survivor or life income, would not be cost efficient for spouses. A customer has contributed $1,000 a year for 10 years to his tax-deferred nonqualified variable annuity. D) be paid to the issuing company to complete the plan. The payout compared to last month's payout. Complete a blank sample electronically to save yourself time and money. The upside was the possibility of higher returns during the accumulation phase and a larger income during the payout phase. Once the contract is annuitized, monthly payments to the customer are: Variable annuity Which of the following is characteristic of fixed annuities? Travel Times Journal found that the average per person cost of a 10-day trip along the Pacific coast, per person, is $1,015. 2019 Ted Fund Donors Random withdrawals do not guarantee how long the money will last because large withdrawals can deplete the funds before the annuitant dies. 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. Skylar Clarine is a fact-checker and expert in personal finance with a range of experience including veterinary technology and film studies. Her agent recommended she choose a variable annuity as a safe haven for the funds. Distributions to the annuitant will fluctuate during the payout period. What will this transaction provide? B) accumulation units. C)Variable annuity contract with a discussion regarding interest rate risk must be filed with FINRA. *Under the mortality guarantee, the insurance company assumes mortality risk by guaranteeing payments for life, though the amount of each payment is not guaranteed. 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. Expert Answer. D) None, because it is the proceeds from a life insurance company. *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. Variable annuities operate in similar ways to . B)fixed in value until the holder retires. C)I and III. C) 10 years of variable payments. B) Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. Investopedia requires writers to use primary sources to support their work. A)Fixed annuities. D) Any time before the accumulation period. C) Mutual fund portfolio consisting of blue chip stocks a variable annuity does not guarantee an earnings rate of return. Variable Annuities. C) value of underlying securities held in the separate account. Early withdrawal is either removal of funds from a fixed-term investment before the maturity date, or the removal of funds from a tax-deferred investment account or retirement savings account before a prescribed time. the agent must be licensed in both insurance and securities. The features of variable deferred annuities are many. All of the following statements about variable annuities are true EXCEPT: She may choose to receive monthly payments for the rest of her life. *A variable annuity does not guarantee an earnings rate because earnings will depend on the performance of the separate account. Contributions to an IRA may be tax deductible, depending on the individual's earnings and participation in a company-sponsored qualified retirement plan. C)such an annuity is designed to combat inflation risk. "Variable Annuities: What You Should Know," Page 6. Reference: 12.3.3 in the License Exam. C) I and IV. 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:

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