The number of accumulation units can rise during the accumulation period. Once the contract is annuitized, monthly payments to the customer are: Future annuity payments will vary according to the separate account's performance. D) II and IV. the SEC. B) variable annuities. Fixed annuities, on the other hand, provide a guaranteed return. 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. Determine whether the following events are independent or dependent. Variable annuities are designed to combat inflation risk. IBM is a global brand and has its presence in 170 countries and operates . The number of annuity units is fixed at the time of annuitization. Your client has a large sum of money to invest from the proceeds of the sale of his home. How Are Nonqualified Variable Annuities Taxed? A joint life with last survivor annuity: a. C)insurance companies keep variable annuity funds in separate accounts from other insurance products. A) I and II. D)0. An annuity is an agreement for one person or organization to pay another a series of payments. All of the following statements regarding variable annuities are true EXCEPT: A) variable annuities offer the investor protection against capital loss. For a retired person, which of the following investments would provide the greatest protection against inflation? If your 60-year-old customer purchases a nonqualified variable annuity and withdraws some of her funds before the contract is annuitized, what are the consequences of this action? D) Variable annuities. All of the following investment strategies offer either fully or partially tax-deductible contributions to individuals who meet eligibility requirements EXCEPT: B)I and III. In a variable life annuity with 10-year period certain, a contract holder receives: B) 0. A Variable Annuity has which of the following characteristics? variable annuity without paying tax at the time of the transfer. c. The separate account provides for a guaranteed minimum return. 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. A)unsuitable because the return on something as conservative as a variable annuity tends to be low. A) There is no risk in a variable annuity. A) Life-only annuity C) II and III. 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: *A variable annuity does not guarantee an earnings rate because earnings will depend on the performance of the separate account. Income that cannot be outlived by the owner *With guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is not guaranteed because payments stop when the annuitant has received an amount equal to the principal account value or the contract term ends. An important basic characteristic of common stocks that makes them a suitable type of investment for the separate account of variable annuities is: "Variable Annuities: What You Should Know," Pages 67. B) I and IV. Single payment deferred annuity. Assuming that the payroll for the last week of the year is to be paid on December 313131, journalize the following entries: Do whatever you want with a Learn About Annuities and Their Myths - F&G: fill, sign, print and send online instantly. Any withdrawals you make prior to the age of 59 may also be subject to a 10% tax penalty. In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. The number of accumulation units is always fixed throughout the accumulation period. A)III and IV. Round to the nearest hundredth of a percent. must precede every sales presentation. D) accumulation shares. B) 10% penalty plus payment of ordinary income tax on all funds withdrawn. A registered representative recommends a variable annuity with an income rider to a client. B) suitable if she has enough equity in the home to fund the variable annuity without cashing out the other VA contract Fixed annuities typically earn at a lower, stable rate. D) I and III A universal variable life policy should be purchased primarily for its insurance features, not its investment features. C) taxed as ordinary income only to the extent of earnings. Question #26 of 48Question ID: 606811 Variable annuities involve underlying equity investments in a separate account. During payout, distributions will fluctuate due to performance in the separate account. have investment risk that is assumed by the investor U.S. Securities and Exchange Commission. If the customer takes a withdrawal of $10,000, what are the tax consequences? Sub accounts and mutual funds are conceptually identical, but sub accounts don't have ticker symbols that investors can easily type into a fund tracker for research purposes. Annuities are complicated products, so that may be easier said than done. &&& \underline{\underline{\$341,718}} The beneficiary is taxed at ordinary income rates during the year the lump sum is received. Once the contract is annuitized, monthly payments to the customer are: D)II and III. Post navigation Contributions to a nonqualified variable annuity are not tax deductible. B) II and IV. These contracts come with high surrender charges. Payments from a variable annuity depend on the securities' value in the separate account's underlying investment portfolio. C) During the annuity period. On any device & OS. savingsbondsGroupinsurance$198,74451,71415,21030,42045,630$341,718, Tax rates assumed: The entire amount is taxed as ordinary income. When the contract is annuitized, the annuitant is credited with a fixed number of annuity units. 10.1 This chapter addresses a number of ABS statistics relating to the economically active population which were not discussed elsewhere. A) complete all paper work to purchase the annuity contract and obtain the clients signature immediately. D) reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. Which of the following recommendations would best meet the customer profile? The annuitant may not contribute and withdraw simultaneously. C) with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed The payout compared to the initial payout upon annuitization. vote on proposed changes in investment policy. C)number of accumulation units. B) II and III B) variable annuities. D)A 10% penalty plus the payment of ordinary income tax on funds withdrawn in excess of the owner's basis. B) payment guarantee. Question #22 of 48Question ID: 606803 Reasonable accommodations may be made to enable individuals with disabilities to perform the essential functions. The accumulation unit's value is used to calculate the total value of the account. All of the following statements regarding variable annuities are true EXCEPT: Based on the information given in the question, the VA recommendation would not be suitable. FINRA. The number of annuity units becomes fixed when the contract is annuitized; it is the value of each unit that fluctuates. You can tailor the income stream to suit your needs. The value of the annuity units is fixed. D) Life annuity with 10-year period certain. Suppose that 20%20 \%20% of their users are United States users who log on daily. 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. A) changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. 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. \hspace{10pt} Federal unemployment (employer only), 0.8%0.8\%0.8%. a variable annuity does not guarantee an earnings rate of return. Annuity units are units of ownership when the contract is in the payout stage. A) periodic payment immediate annuity. "Variable Annuities: What You Should Know," Page 3. *A variable annuity is a security and must be registered with the SEC, not FINRA. C)3800. Random withdrawals do not guarantee how long the money will last because large withdrawals can deplete the funds before the annuitant dies. Guaranteed Lifetime Annuity: How They Work, When They Pay You, This is also generally true of retirement plans. B)I and IV. Typically, they allow one withdrawal each year during the accumulation phase. D)separate account may consist of mutual funds. The value of the customer's account is converted into annuity units if and when the customer decides to annuitize the contract. Practice all cards. C) The insurance company. The entire amount is taxed as ordinary income. A) I and III. Life income riders are best suited for those who anticipate a lengthy retirement and are generally not yet retired when making the VA purchase. By clicking Accept All Cookies, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts. C) 10% penalty plus payment of ordinary income tax on all funds withdrawn exceeding basis. And, unlike a fixed annuity, variable annuities do not provide any guarantee that you will earn a return on your investment. the state insurance commission. C)The entire $10,000 is taxable as ordinary income. Fixed Annuity, Retirement Annuities: Know the Pros and Cons. Which of the following statements regarding variable annuities are TRUE? Question #42 of 48Question ID: 606830 D) minimum guaranteed death benefit. D)Any tax due is deferred. 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. B) the safety of the principal invested. Classifying annuities There are many categories of annuities. When the first party dies, the annuity payment is made to the survivor. D) each annuity unit's value varies with time, but the number of annuity units is fixed. IV. C) There is no tax as the withdrawal is considered return of capital. If the contract holder dies before the period expires, the remaining payments are made to the beneficiary. *BEST Suited for VA-Age 56, available cash to invest, maxes out IRA and 401(k) plan VA will be supplemental income, would not be suitable for cust. The creation of an estate. B)a majority vote from the shareholders is required to change the investment objectives. A)each annuity unit's value and the number of annuity units vary with time. If your customer invests in a variable annuity and chooses to annuitize at age 65, which of the following statements are TRUE? How Good of a Deal Is an Indexed Annuity? D) Two-thirds of the withdrawal is taxable as ordinary income. This recommendation is: 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. All of the following are true about annuities EXCEPT: they have all the same characteristics as life insurance. Variable annuities provide protection from inflation because their monthly income can increase depending on the separate account's performance. Reference: 12.3.3 in the License Exam. 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. A) I and II With a fixed annuity, by contrast, the insurance company assumes the risk of delivering whatever return it has promised. A)defined contribution plans. A)II and IV. Needs - are goal-directed forces that people experience. Reference: 12.1.2.1.1 in the License Exam. An investor owning which of the following variable annuity contracts would hold accumulation units? 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: 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. Accumulation Period of Fixed Annuities During this period, premiums are credited with interest which accumulates on a yearly basis. regulated under both securities and insurance laws. What Are the Biggest Disadvantages of Annuities? A) A variable annuity \hspace{7pt} b. January 444, to record the employers payroll taxes on the payroll to be paid on January 444. A customer has a nonqualified variable annuity. *Once a variable annuity is annuitized, the accumulation units are converted into a fixed number of annuity units. A joint life with last survivor contract covers multiple annuitants and ceases payments at the death of the last surviving annuitant. A 10% penalty applies only if distributions begin before age 59-. have investment risk that is assumed by the investor Distribution of dividends occurs during the accumulation period. Before the contract is annuitized, your client, currently age 60, withdraws some funds for personal purposes. Indexed annuity owners receive credited interest tied to the fluctuations of the linked index An immediate annuity consists of a single premium An immediate annuity has a single premium. Drives - are hardwired characteristics of the brain that correct deficiencies or maintain an internal equilibrium by producing emotions to energize individuals. A joint-and-last-survivor annuity is a payout option where: The value of the customer's account is converted into annuity units if and when the customer decides to annuitize the contract. The value of accumulation and annuity units varies with the investment performance of the separate account. C)It will be higher. The payout of an annuitized variable annuity account changes from month to month in a manner determined by which of the following? *Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. Question #24 of 48Question ID: 606806 The value of an annuity unit varies from month to month according to the performance of the separate account in comparison to the assumed interest rate. D)I and III. A customer has a nonqualified variable annuity. 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. Science Health Science Nursing. Question: The following are characteristics of a public conglomerate: I) It is designed to operate various divisions for the long run. Based on this information the RR should: A) a minimum rate of return is guaranteed. 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. A)variable annuities will protect an investor against capital loss. An Immediate Annuity is designed to provide each of the following features, EXCEPT: The creation of an estate. D)Dow Jones Industrial Average. \hspace{10pt} Medicare, 1.5%1.5\%1.5% *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. B)unsuitable because her situation exposes her to surrender charges and early withdrawal penalties in exchange for insufficient benefits. must be filed with FINRA. C) with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed A) a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero Each of the remaining statements are true. A universal variable life policy should be purchased primarily for its insurance features, not its investment features. The investor purchased accumulation units. All of the following statements about variable annuities are true EXCEPT: A) defined contribution plans. Spartan Technology Services and Solutions Private Limited is a subsidiary of IBM (International Business Machines) Corporation. During the accumulation phase, you make purchase payments. B)Tax-free municipal bonds B)II and III. Spartan Technology Services and Solutions Private Limited is a subsidiary of IBM (International Business Machines) Corporation. B)I and II The client's investment objectives, tax bracket, investment experience and risk tolerance all align well with a VA recommendation. CDs insured by the FDIC. b. C) the yield is always higher than bond yields. Distribution can take place before or during any solicitation for sale. D) an accounting measure used to determine the contract owner's interest in the separate account. If the owner of a variable annuity dies during the accumulation period, any death benefit will: 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 Once a variable annuity has been annuitized: Reference: 12.1.2 in the License Exam, Question #21 of 48Question ID: 606812 B) The entire $10,000 is taxable as ordinary income. The separate account is NOT likely to invest in: The money paid in will be returned tax free, but the earnings portion will be taxed as ordinary income. Annuities: How to Find the Right One for You, How a Fixed Annuity Works After Retirement, Pros and Cons of Indexed Universal Life Insurance. A 3 C)II and IV. C) A 10% penalty plus the payment of ordinary income tax on all of the funds withdrawn. The $30,000 contract value represents $10,000 of contributions and $20,000 of earnings. continues payments as long as one annuitant is alive. In deciding whether to put money into a variable annuity versus some other type of investment, its worth weighing these pros and cons. C) value of underlying securities held in the separate account. They can be classified by: Nature of the underlying investment - fixed or variable Immediate life annuity with 10-year period certain. Investopedia does not include all offers available in the marketplace. B)Two-thirds of the withdrawal is taxable as ordinary income. In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. A) II and III. Generally, a life-only contract pays the most per month because payments cease at the annuitant's death. Registration with FINRA is de facto registration with the SEC; no registration is required by the state banking commission. He makes the following four statements, all of which are true EXCEPT Are There Penalties for Withdrawing Money From Annuities? \hspace{10pt} \text{Warehouse salaries} & 110,000 & \hspace{10pt} \text{Social security tax withheld} & 51,714\\ *Contributions to a nonqualified annuity are made with the owner's after-tax dollars.
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