However, it does guarantee payments for life (mortality). 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) Age 40, currently unemployed 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. This recommendation is: C) The insurance company. Simple and general annuities problems with solutions the agent must be licensed in both insurance and securities. D)suggest to the client that perhaps a loan or refinancing his vacation home might be a better way to fund the contract purchase. The investor has already paid tax on the contributions but the earnings have grown tax-deferred. Then find the probability of the event. D) 100% tax deferred. D) Variable annuity. C) with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed Often used for retirement planning purposes, it is meant to provide a regular (monthly, quarterly, annual) income stream, starting at some point in the future. C) 100% tax free. Question #43 of 48Question ID: 606809 A) It will be higher. A) Any tax due is deferred. A)II and IV. Variable annuities are designed to combat inflation risk. B)4200. \hspace{7pt} a. December 303030, to record the payroll. B) Life annuity with period certain \hspace{10pt} \text{Sales salaries} & \$\hspace{5pt} 670,000 & \hspace{10pt} \text{Income tax withheld} & \$198,744\\ Once a variable annuity has been annuitized: He wants to ensure that the client, in addition to meeting suitability requirements, is aware of certain variable annuity contract characteristics. A) I and III. Reference: 12.3.2.1 in the License Exam. B) Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. D) Variable Annuity. used for the investment of funds paid by contract holders. a variable annuity guarantees an earnings rate of return. D)I and IV. IBM is a global brand and has its presence in 170 countries and operates . II) It has an internal capital market wherein each division competes for funds. On any device & OS. If an investor has a fixed-annuity contract with an insurance company, which of the following risks is assumed by the investor? C) I and III. An accumulation unit in a variable annuity contract is: B)I and III. Fixed annuities. B)fixed in value until the holder retires. All of the following statements concerning a variable annuity are correct EXCEPT: Final answer. B)II and III. *VAs are less suitable for individuals who have not yet made maximum contributions to other retirement accounts such as IRAs and 401ks. C) III and IV If at all you go deeper, then you will find a wide range of annuity products from a variety of companies. B)Value of each annuity unit each month. 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 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? For this potential advantage, the investor, rather than the insurance company, assumes the investment risk. A)unsuitable because the return on something as conservative as a variable annuity tends to be low. B)a minimum rate of return is guaranteed. C) Universal variable life policy. *Payments from a variable annuity depend on the securities' value in the separate account's underlying investment portfolio. All of the following statements about variable annuities are true EXCEPT: Reference: 12.3.3 in the License Exam. D) the payout plans provide the client income for life. Question #31 of 48Question ID: 606836 A variable annuity is a type of annuity contract in which the value can vary based on the performance of an u . Based on the clients profile which of the following would be the best recommendation? Refinancing a home to draw out equity has been identified by FINRA as an abusive sales tactic regarding the sales of VAs. The Three Main Types of Annuity Insurance - Fixed, Variable, and Equity B) value of annuity units. A guaranteed lifetime annuity promises to pay the owner an income for the rest of their life. Deal with mathematic Math is all about solving equations and finding the right answer. Instructions\textsf{\textcolor{#4257b2}{Instructions}}Instructions A) Money market fund. D) tax free. Question #19 of 48Question ID: 606826 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. Listing tax-deferred growth as an objective for retirement income, which of the following investments is most suitable? C) the client assumes the investment risk. Insurance companies introduced the variable annuity as an opportunity to keep pace with inflation. 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. Suggesting that loans or drawing equity from a home to fund VA contracts have also been targeted as abusive sales practices. When the contract is annuitized, the annuitant is credited with a fixed number of annuity units. B)each annuity unit's value varies with time, but the number of annuity units is fixed. Inflation-hedging, using both tax deferral combined with market growth potential, is made possible by variable annuities #. A) The entire amount is taxed as ordinary income, because it is not life insurance. This guideline has been prepared for use by Federal agencies. C)Life annuity. D) II and III. Reference: 12.3.3 in the License Exam. Which of the following statements regarding variable annuities are TRUE? These contracts come with high surrender charges. Since the client is older than 59 at the time of distribution, the additional 10% penalty tax is not incurred. When a partial withdrawal is made from an annuity, the earnings are considered to be taken out first for tax purposes (or LIFO). B)Fixed annuity contract with a discussion regarding timing risk They offer broad diversification in the securities market and potential growth, all while using the power of tax deferral. B) A 30 year old construction worker recently unemployed who wants to invest his severance pay amounting to 9 months salary. The beneficiary is taxed at ordinary income rates during the year the lump sum is received. Reference: 12.3.3 in the License Exam. 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. C) each annuity unit's value and the number of annuity units vary with time. With a fixed annuity, by contrast, the insurance company assumes the risk of delivering whatever return it has promised. 6102..55.001) is being updated on an ongoing basis. II. Reference: 12.3.1 in the License Exam. Once the contract is annuitized, monthly payments to the customer are: 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. Typically, they allow one withdrawal each year during the accumulation phase. What Are Ordinary Annuities, and How Do They Work (With Example)? B)Universal variable life policy. Post navigation C) Corporate bonds. A) number of annuity units. In addition, if the customer is not at least 59-, there will be a tax penalty of an additional 10%. Annuities due are a type of annuity where payments are made at the beginning of each payment period. The number of annuity units is fixed at the time of annuitization. a variable annuity does not guarantee an earnings rate of return. Who assumes the investment risk in a variable annuity contract? B) life income B) IPO. savingsbondsGroupinsurance$198,74451,71415,21030,42045,630$341,718, Tax rates assumed: D) reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. D) A 10% penalty plus the payment of ordinary income tax on funds withdrawn in excess of the owner's basis. B) II and IV. Get the free Learn About Annuities and Their Myths - F&G Flashcards - Securities and Tax - FreezingBlue On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity). (The exception is the fixed income annuity, which has a moderate to high payout that rises as the annuitant ages). b. B) The proceeds minus John's cost basis taxed as ordinary income at Sue's tax rate. When a partial withdrawal is made from an annuity, the earnings are considered to be taken out first for tax purposes (or LIFO). Simple and general annuities problems with solutions A)II and IV. C) II and IV MetLife offers a comprehensive benefits program, including healthcare benefits, life insurance, retirement benefits, parental leave, legal plan services and paid time off. A)There is no tax as the withdrawal is considered return of capital. D)II and IV. Fixed annuities are not considered securities as return is guaranteed by the insurance company issuer. If the annuitant should die during that time, any death benefit would be paid to a beneficiary designated by the annuitant at the time the annuity was purchased. Which of the following statements regarding variable annuities are TRUE? C) insurance guarantee. In addition, an element of risk must be present. 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. Variable annuity salespeople must register with all of the following EXCEPT: Which of the following are defined as securities? Nicks Enterprises has purchased a new machine tool that will allow the company to improve the efficiency of its operations. A) Capital gains taxation on the earnings withdrawn in excess of the owner's basis. 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: The number of annuity units is fixed. A) 4000. A) There is no risk in a variable annuity. In addition, if the customer is not at least 59-, there will be a tax penalty of an additional 10%. Outgoing personality with the ability to develop relationships (i.e., "People Person") and a sincere desire to help others Fearless, positive attitude, and willingness to be accountable for results Organized, detail-oriented, and excellent time-management skills A desire for continuous learning D) not suitable because a lifetime income rider is only for someone who is already retired. D)Municipal bonds. *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) an accounting measure used to determine payments to the owner of the variable annuity. The value of the annuity units is fixed. John is the annuitant in a variable plan, and Sue is the beneficiary. Are Variable Annuities Subject to Required Minimum Distributions? Reference: 12.1.2 in the License Exam. A)Purchasing power risk. A) not suitable 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. I. C) 10% penalty plus payment of ordinary income tax on all funds withdrawn exceeding basis. IBM Noida, Uttar Pradesh, India1 month agoBe among the first 25 applicantsSee who IBM has hired for this roleNo longer accepting applications. Variable Annuities Flashcards | Quizlet B)suitable regardless of funding sources EEO IS THE LAW . Francisco R. - Financial Professional - Prudential Financial | LinkedIn U.S. Securities and Exchange Commission. D) Joint and last survivor annuity. 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) II and III The payout of an annuitized variable annuity account changes from month to month in a manner determined by which of the following? 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? This includes transportation, food, lodging, and entertainment. Contributions to an IRA may be tax deductible, depending on the individual's earnings and participation in a company-sponsored qualified retirement plan. B)Capital gains taxation on the earnings withdrawn in excess of the owner's basis. must provide full and fair disclosure. 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. They are also riddled with fees, which can cut into profits. must precede every sales presentation. He originally invested $29,000 4 years ago; it now has a value of $39,000. A) mutual fund units. The trial of the assassins commenced on the following day; and the evidence being so clear, they were both found guilty, and condemned, to be broken alive on the wheel. Your client has $50,000 to invest. C)It will be higher. IBM hiring Practitioner- Policy Admin in Noida, Uttar Pradesh, India For example, when paying rent, the rent payment (PMT) It is innate and universal. On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity). withdraw funds without any tax consequences. The payout compared to last month's payout. That can adversely affect your returns over the long term, compared with other types of investments. B. CDs insured by the FDIC. A)II and IV. Which of the following statements is not true about the characteristics of a trend? A 45-year-old employed individual with no other retirement accounts in place C)I and III. Reference: 12.1.4.1 in the License Exam. a variable annuity guarantees an earnings rate of return. The client's investment objectives, tax bracket, investment experience and risk tolerance all align well with a VA recommendation. vote on proposed changes in investment policy. How is the distribution taxed? Based only on these facts, the variable annuity recommendation is Life income riders are best suited for those who anticipate a lengthy retirement and are generally not yet retired when making the VA purchase. B)a majority vote from the shareholders is required to change the investment objectives. You purchase a variable annuity contract by making either a single purchase payment or a series of purchase payments. C)with guaranteed minimum withdrawal benefits (GMWBs) the periodic payments can be monthly, quarterly or annually Of the total payroll for the last week of the year, $30,000\$30,000$30,000 is subject to unemployment compensation taxes. A customer has contributed $1,000 a year for 10 years to his tax-deferred nonqualified variable annuity. If you need to withdraw money from the account because of a financial emergency, you may face surrender fees. B) the number of annuity units is fixed, and their value remains fixed. If your customer invests in a variable annuity and chooses to annuitize at age 65, which of the following statements are TRUE? B) The proceeds minus John's cost basis taxed as ordinary income at Sue's tax rate. Consequently, the client pays taxes only on the growth portion of the withdrawal ($10,000). You have 4 clients each expressing interest in a variable annuity contract. Are There Penalties for Withdrawing Money From Annuities? Income that cannot be outlived by the owner D) value of accumulation units. D) Capital gains tax on earnings exceeding basis. The following information about the payroll for the week ended December 303030 was obtained from the records of Vienna Co.: Salaries:Deductions:Salessalaries$670,000Incometaxwithheld$198,744Warehousesalaries110,000Socialsecuritytaxwithheld51,714Officesalaries234,000Medicaretaxwithheld15,210$1,014,000U.S. Your 55-year-old client invested $50,000 four years ago in a nonqualified variable annuity. All of the following characteristics are shared by both a mutual fund and a variable annuity's separate account EXCEPT: B) The policyowner. B) It will be lower. Though there is no beneficiary designation during the annuitization, this is not an issue for this annuitant. Therefore, ordinary income taxes will apply to the entire $10,000. III. Ideally they should be funded with readily available cash rather than using funds liquidated from existing investments. Variable Annuity: Definition and How It Works, Vs. Fixed Annuity D) expense guarantee. A registered representative explaining variable annuities to a customer would be CORRECT in stating that: must be filed with FINRA. Once a customer annuitizes a variable annuity, which of the following statements are TRUE? LESSON 7: ANNUITIES - FIXED AND VARIABLE - course.uceusa.com Question: The following are characteristics of a public conglomerate: I) It is designed to operate various divisions for the long run. A)value of underlying securities held in the separate account. She may choose to receive monthly payments for the rest of her life. A) I and IV. The funds in an annuity are off-limits to creditors and other debt collectors. A)each annuity unit's value and the number of annuity units vary with time. . 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. Can I Borrow from My Annuity for a House Down Payment? B) accumulation units. An investor who purchases a fixed annuity contract assumes purchasing-power risk. All of the following investment strategies offer either fully or partially tax-deductible contributions to individuals who meet eligibility requirements EXCEPT: 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. D) I and III. Which of the following is NOT associated with characteristics of shares A 3 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) Joint tenants annuity. A variable annuity is a contract between you and an insurance company, under which the insurer agrees to make periodic pay- ments to you, beginning either immediately or at some future date. Variable annuities provide protection from inflation because their monthly income can increase depending on the separate account's performance. 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 . *Contributions to a nonqualified variable annuity are not tax deductible. The correct answer was: partially a tax-free return of capital and partially taxable. *The return on a variable annuity is not guaranteed; it is determined by the underlying portfolio's value. B) fixed payments for 10 years, followed by variable payments for life. C) 3800. D) the number of annuity units becomes fixed when the contract is annuitized. B) 0. D) an accounting measure used to determine the contract owner's interest in the separate account. 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. What are the characteristics of annuity? - Wise-Answers You can tailor the income stream to suit your needs. must provide full and fair disclosure. Reference: 12.2.1 in the License Exam. Your client has a large sum of money to invest from the proceeds of the sale of his home. the state banking commission. When a variable annuity contract is annuitized, the number of annuity units is fixed. C. Frequently Asked Questions Anti-Money Laundering Program and Suspicious All of the following are accurate statements to make to the client EXCEPT