a variable annuity guarantees an earnings rate of return. D) I and II. \hspace{7pt} a. December 303030, to record the payroll. Sub accounts and mutual funds are conceptually. B) The policyowner. A)each annuity unit's value and the number of annuity units vary with time. The anti-money laundering rules for insurance companies highlight that each insurance company - like other financial institutions subject to anti-money laundering program requirements - must develop a risk-based anti-money laundering program that identifies, assesses, and mitigates any risks of money laundering, terrorist financing, and other A) defined contribution plans. Reference: 12.1.2 in the License Exam, Question #21 of 48Question ID: 606812 A variable annuity has two phases: an accumulation phase and a payout (annuitization) phase. Essential Characteristics: D) variable annuities may only be sold by registered representatives. A) II and IV. A)Fixed annuities. How does an indexed annuity differ from a fixed annuity? *During the payout period, payments are based on a fixed number of annuity units established when the contract was annuitized. C)III and IV Contributions to a nonqualified annuity are made with the owner's after-tax dollars. *Variable annuity contracts were devised to help investors keep pace with inflation. 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. If you need to withdraw money from the account because of a financial emergency, you may face surrender fees. D) I and II. C) annuity units. The investor purchased accumulation units. 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. An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are. Reference: 12.1.2 in the License Exam. A registered representative explaining variable annuities to a customer would be CORRECT in stating that: Each of the remaining statements are true. U.S. Securities and Exchange Commission. \hspace{10pt} State unemployment (employer only), 3.8%3.8\%3.8% A)the number of annuity units becomes fixed when the contract is annuitized. *The minimum guaranteed death benefit is provided by that portion of the payment invested in the insurance company's general account. Herpes Zoster has all of the following characteristics except: Group of answer choices. D) 100% tax deferred. No Hibernation for Issuers of Index-Linked Variable Annuities and Index However, because the client is not yet age 59- when making the withdrawal, he also pays a 10% penalty, or $1,000. Refinancing a home to draw out equity has been identified by FINRA as an abusive sales tactic regarding the sales of VAs. Reference: 12.3.1 in the License Exam. When the second party dies, all payments cease. Question #17 of 48Question ID: 606802 Question #33 of 48Question ID: 606832 D)I and II. the state banking commission. He originally invested $29,000 4 years ago; it now has a value of $39,000. Question #15 of 48Question ID: 606804 The accumulation unit's value is used to calculate the total value of the account. Based on this information the RR should: Contributions to an IRA may be tax deductible, depending on the individual's earnings and participation in a company-sponsored qualified retirement plan. The separate account performance compared to last month's performance. A) two people are covered and payments continue until the second death. A) Any tax due is deferred. If you die before the payout phase, your beneficiaries may receive a. Which of the following statements is not true about the characteristics of a trend? Your client has $50,000 to invest. C) II and III. CDs insured by the FDIC. Frequently Asked Questions Anti-Money Laundering Program and Suspicious Underlying equity investments T, age 70, withdraws cash from a profit-sharing plan and purchases a Straight Life Annuity. Her intent was to use the funds for the down payment on a house after graduation. If the customer takes a withdrawal of $10,000, what are the tax consequences? All of the following are characteristics of variable annuity contracts All of the following statements regarding variable annuities are true EXCEPT: A) variable annuities offer the investor protection against capital loss. The growth portion is subject to a 10% penalty. C)annuity units. D) A 10% penalty plus the payment of ordinary income tax on funds withdrawn in excess of the owner's basis. Income that cannot be outlived by the owner C. B)Variable annuities. A guaranteed lifetime annuity promises to pay the owner an income for the rest of their life. 8 annuities provide a guaranteed rate of return, whereas annuities provide conservative to aggressive investments whose rates of return are not guaranteed. Annuity units are units of ownership when the contract is in the payout stage. Investopedia requires writers to use primary sources to support their work. 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. 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. Listing tax-deferred growth as an objective for retirement income, which of the following investments is most suitable? 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. A variable annuity's separate account is: A separate account will invest in a number of different securities. D)Dow Jones Industrial Average. It is the starting point of motivation because they generate emotions. Deferred Annuity Definition, Types, How They Work, What Is a Fixed Annuity? do not have a separate account A)accumulation shares. B) the client may vote for the board of directors or board of managers. They are also not considered suitable for anyone who anticipates needing a lump sum within a short time frame to fund other endeavors. B) prime rate. A) a minimum rate of return is guaranteed. *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. A. When the first party dies, the annuity payment is made to the survivor. Question #36 of 48Question ID: 606805 B)value of annuity units. A) mortality guarantee. Ideally they should be funded with readily available cash rather than using funds liquidated from existing investments. A)unsuitable because the return on something as conservative as a variable annuity tends to be low. *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. Reference: 12.3.1 in the License Exam. D)Any tax due is deferred. C)II and III. is required by the Securities Act of 1933. 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. An investor who has purchased a nonqualified variable annuity has the right to: Variable annuities must be registered with: All of the following statements concerning a variable annuity are correct EXCEPT: D) variable annuities will protect an investor against capital loss. C) III and IV Insurance companies introduced the variable annuity as an opportunity to keep pace with inflation. Instructions\textsf{\textcolor{#4257b2}{Instructions}}Instructions This chapter was updated on 15 December, 2005. B) Corporate debt securities D) reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. A joint life with last survivor contract covers multiple annuitants and ceases payments at the death of the last surviving annuitant. 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. 10.1 This chapter addresses a number of ABS statistics relating to the economically active population which were not discussed elsewhere. 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. All of the following statements regarding variable annuities are true EXCEPT: A) complete all paper work to purchase the annuity contract and obtain the clients signature immediately. Your customer in his early 30s has received a modest inheritance from a relative. Chapter 7: Annuities Flashcards | Quizlet 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: 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. During payout, distributions will fluctuate due to performance in the separate account. A client has purchased a nonqualified variable annuity from a commercial insurance company. B)100% taxable. Are Variable Annuities Subject to Required Minimum Distributions? 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. B) single payment deferred annuity. 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) There is no guarantee regarding the investment results of the separate account. Following the transition to T+1 in the U.S. markets, Commission staff will continue to work with industry leaders, public interest advocates, investors and other regulators to assess the future feasibility of a T+0 settlement standard cycle, and seek to identify ways to overcome the challenges associated with such a move, as articulated in the . What percentile is represented by $710? Both products typically have a wide range of options across equities, bonds and money market instruments. D) expense guarantee. A 45-year-old investor takes a lump-sum distribution from a nonqualified variable annuity. D) None, because it is the proceeds from a life insurance company. Reference: 12.1.4.2 in the License Exam. An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are Get Started. B) II and III. Only variable annuities have payout plans that provide the client income for life. Distributions from such an annuity are computed on a LIFO basis with the income taxed first. a variable annuity does not guarantee payments for life. Reference: 12.2.1 in the License Exam. The number of annuity units rises once annuitization begins. You can learn more about the standards we follow in producing accurate, unbiased content in our. D)II and III. savingsbonds30,420Groupinsurance45,630$341,718\begin{array}{lrlr} The value of accumulation and annuity units varies with the investment performance of the separate account. The correct answer was: partially a tax-free return of capital and partially taxable. Francisco R. - Financial Professional - Prudential Financial | LinkedIn She may choose to receive monthly payments for the rest of her life. *Under the mortality guarantee, the insurance company assumes mortality risk by guaranteeing payments for life, though the amount of each payment is not guaranteed. You can tailor the income stream to suit your needs. What Are Ordinary Annuities, and How Do They Work (With Example)? He makes several statements regarding the contract. D)suitable due to the relative safety of the investment. Which of the following is not a characteristic of a program module? C)Corporate bonds. A) number of annuity units. 222. Hire Velocity hiring Customer Escalation Agent in Tampa, Florida In a variable annuity contract, the provision that guarantees the annuitant payments for life is called the: Reference: 12.3.3 in the License Exam. B)Tax-free municipal bonds A customer has a nonqualified variable annuity. C)such an annuity is designed to combat inflation risk. the SEC. *A variable annuity payout is determined by comparing account performance with AIR, and this month's payout with last month's payout. 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. a variable annuity has which of the following characteristics B)I and II C) II and III. guarantees payments for a certain period of time. a. When money is deposited into the annuity, it is purchasing accumulation units. A) The fact that the annuity payment may increase or decrease. D) Variable annuities. C)Mortality risk. The number of annuity units varies. Qualified Longevity Annuity Contract (QLAC): Definition, Taxes, and Example, Present Value of an Annuity: Meaning, Formula, and Example, Future Value of an Annuity: What Is It, Formula, and Calculation, Calculating Present and Future Value of Annuities, Present Value Interest Factor of Annuity (PVIFA) Formula, Tables. If the client, who is in a 30% tax bracket, makes a random withdrawal of $15,000, what will the tax liability to the IRS be? In March, the actual net return to the separate account was 8%. B) variable annuities are classified as insurance products. The $30,000 contract value represents $10,000 of contributions and $20,000 of earnings. D)money market funds. D) periodic payment deferred annuity. C) with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed variable An immediate annuity consists of a Single Premium T has an annuity that guarantees an income payment for the rest of his life. What is her total tax liability? A) I and III. D) the number of annuity units becomes fixed when the contract is annuitized. 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. D) value of accumulation units. *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. 6102..55.001) is being updated on an ongoing basis. D)II and III.



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