a variable annuity has which of the following characteristics

Which of the following is characteristic of variable annuities? Which of the following recommendations would best meet the customer profile? D) each annuity unit's value varies with time, but the number of annuity units is fixed. B) life income \hspace{7pt} b. January 444, to record the employers payroll taxes on the payroll to be paid on January 444. B) It will be lower. *Mortality risk- If an annuitant lives longer than expected, the insurance company will have to continue payments longer than expected. An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are Get Started. B) The proceeds minus John's cost basis taxed as ordinary income at Sue's tax rate. must be filed with FINRA. Which is it? The number of annuity units is fixed at the time of annuitization. D) The investment risk is shared between the insurance company and the policyowner. C) During the annuity period. Contributions to an IRA may be tax deductible, depending on the individual's earnings and participation in a company-sponsored qualified retirement plan. Anthony Battle is a CERTIFIED FINANCIAL PLANNER professional. A) I and IV. 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. The growth portion is taxed as ordinary income. used to escrow late or otherwise delinquent premium payments. C) III and IV. B)variable annuities are classified as insurance products. The following are the characteristics or the hierarchy of a trend except A. Gigatrends C. Megatrends B. Macrotrends D. Nanotrends _____11. When a variable annuity contract is annuitized, the number of annuity units is fixed. A)II and IV. variable An immediate annuity consists of a Single Premium T has an annuity that guarantees an income payment for the rest of his life. This includes transportation, food, lodging, and entertainment. Among annuities, variable annuities differ from fixed annuities, which provide a specific and guaranteed return. B)I and III. B) I and III. must be filed with FINRA. There are also immediate annuities, which begin paying income right away. a. The growth portion is subject to a 10% penalty. A) 2800. Reference: 12.3.3 in the License Exam. D)Municipal bonds. A) I and II are purchased primarily for their insurance features C)prime rate. On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity). What is the taxable consequence of this withdrawal to your client? Question #47 of 48Question ID: 606813 A variable annuity's separate account is: A) used for the investment of monies paid by variable annuity contract holders B) separate from the insurance company's general investments C) operated in a manner similar to an investment company D) as much a security as it is an insurance product All of the above IV. A) complete all paper work to purchase the annuity contract and obtain the clients signature immediately. Home; About. If you die before the payout phase, your beneficiaries may receive a. As part of the registration requirements, a prospectus must be filed and distributed to prospective investors. A)number of annuity units. For example, if the income is monthly, the first payment comes one month after the immediate annuity is bought. He wants to ensure that the client, in addition to meeting suitability requirements, is aware of certain variable annuity contract characteristics. The holder of a variable annuity receives the largest monthly payments under which of the following payout options? *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. Reference: 12.1.2 in the License Exam. The number of annuity units rises once annuitization begins. An 18-year-old, unmarried high school student sought a safe investment for a $30,000 bequest until after she graduated from college. Both products typically have a wide range of options across equities, bonds and money market instruments. It may be used by nongovernmental . A) Joint tenants annuity. A variable annuity is a type of annuity contract in which the value can vary based on the performance of an u . Then find the probability of the event. A)II and IV. A) a minimum rate of return is guaranteed. *A variable annuity payout is determined by comparing account performance with AIR, and this month's payout with last month's payout. B) payments continue until the death of the primary owner. D)an accounting measure used to determine payments to the owner of the variable annuity. Since the client is older than 59 at the time of distribution, the additional 10% penalty tax is not incurred. Licensed to sell Variable Annuities in the following state(s): FL, TX . There is no clear answer to this. B) II and III The customer, in the accumulation stage of the annuity, is holding accumulation units. B)corporate stock. D) an accounting measure used to determine the contract owner's interest in the separate account. They are also riddled with fees, which can cut into profits. In this case, the investor is taking a lump-sum distribution before reaching age 59- and must pay an additional 10% penalty on the taxable amount. A) Ordinary income tax on earnings exceeding basis. Generally, a life-only contract pays the most per month because payments cease at the annuitant's death. No, annuities are not FDIC-insured as they are not bank products. B) Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. 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. All of the following are accurate statements to make to the client EXCEPT The investor has already paid tax on the contributions but the earnings have grown tax-deferred. Her agent recommended she choose a variable annuity as a safe haven for the funds. The tax on this is $2,800 ($10,000 x 28%). Here is how guaranteed lifetime annuities work. *The owner of a life annuity with 10-year period certain will receive payments for life, subject to a minimum of 10 years. A) Capital gains taxation on the earnings withdrawn in excess of the owner's basis. Each of the remaining statements are true. B) accumulation units. You can learn more about the standards we follow in producing accurate, unbiased content in our. The value of the customer's account is converted into annuity units if and when the customer decides to annuitize the contract. D) the number of annuity units becomes fixed when the contract is annuitized. Question #20 of 48Question ID: 606808 C)not suitable because a lifetime income rider is only for someone who is already retired 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)Variable annuity. Of the 4 client profiles below, which might be the best suited for a variable annuity recommendation? Annuities are complicated products, so that may be easier said than done. Reference: 12.2.1 in the License Exam. IV. A) periodic payment immediate annuity. B) payment guarantee. Distributions to the annuitant will fluctuate during the payout period. Fixed annuities, on the other hand, provide a guaranteed return. You purchase a variable annuity contract by making either a single purchase payment or a series of purchase payments. 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. I. The client's investment objectives, tax bracket, investment experience and risk tolerance all align well with a VA recommendation. If the annuitant dies during the accumulation period, his/her beneficiary will receive the promised annuity payments. D) None, because it is the proceeds from a life insurance company. Single payment deferred annuity. D)suitable due to the relative safety of the investment. Instructions\textsf{\textcolor{#4257b2}{Instructions}}Instructions The payout compared to last month's payout. D) III and IV. Because common stocks are not fixed dollar investments, they have the opportunity to keep pace with inflation. 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. At the end of the year your account has a value of 10750. B) the state insurance department. All of the following investment strategies offer either fully or partially tax-deductible contributions to individuals who meet eligibility requirements EXCEPT: C)I and IV. The remainder of the premium is invested in the separate account. 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. B) II and IV. A customer has contributed $1,000 a year for 10 years to his tax-deferred nonqualified variable annuity. Reference: 12.1.4.2 in the License Exam. 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? a variable annuity guarantees an earnings rate of return. About Us If the account is annuitized, the investor has chosen a payout option. B)fixed in value until the holder retires. && \hspace{10pt}\text{Group insurance} & \underline{45,630}\\ Once the contract is annuitized, monthly payments to the customer are: a variable annuity does not guarantee payments for life. Therefore, variable annuities must be registered with the state insurance commission and the Securities and Exchange Commission. 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. A)accumulation shares. Distribution can take place before or during any solicitation for sale. If an investor has a fixed-annuity contract with an insurance company, which of the following risks is assumed by the investor? D) I and II. Herpes Zoster has all of the following characteristics except: Group of answer choices. B)It will be lower. These contracts come with high surrender charges. Fixed Annuity, Retirement Annuities: Know the Pros and Cons. C)I and III. B)a minimum rate of return is guaranteed. If the customer takes a withdrawal of $10,000, what are the tax consequences? Distributions from such an annuity are computed on a LIFO basis with the income taxed first. 2019 Ted Fund Donors order now. Annuities: How to Find the Right One for You, How a Fixed Annuity Works After Retirement, Pros and Cons of Indexed Universal Life Insurance. The tax on this is $2,800 ($10,000 x 28%). 6102..55.001) is being updated on an ongoing basis. Variable Annuities. externalities. D)separate account may consist of mutual funds. B)I and IV. A guaranteed lifetime annuity promises to pay the owner an income for the rest of their life. A variable annuity does not guarantee an earnings rate because earnings will depend on the performance of the separate account. A registered representative recommends a variable annuity with an income rider to a client. The beneficiary is taxed at ordinary income rates during the year the lump sum is received. III. An individual retirement annuity is an investment vehiclesimilar to an individual retirement accountthat is offered by insurance companies. A) two people are covered and payments continue until the second death. Which of the following recommendations would best meet the customer profile? *The accumulation period of a variable annuity may continue for many years. ($5,000) to a stock fund. D)each annuity unit's value is fixed, but the number of annuity units varies with time. Determine the revenue equation given the profit and expense equations. A) III and IV. b) What probability is the 20%20 \%20% mentioned above? Annual depreciation on the machine is$12,000, and the tax rate of the company is 25%. B) Life annuity. An investor owning which of the following variable annuity contracts would hold accumulation units? b. Variable annuity Which of the following is characteristic of fixed annuities? 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? C)earnings only and taxable Suggesting that loans or drawing equity from a home to fund VA contracts have also been targeted as abusive sales practices. A) variable annuities offer the investor protection against capital loss. Fixed income instruments, like bonds and fixed annuities, are subject to purchasing power risk. How is the distribution taxed? For an investor, which of the following is the most important factor in determining the suitability of a variable annuity investment? D) Age 27, saving for first home. is required by the Securities Act of 1933. III. The correct answer was: partially a tax-free return of capital and partially taxable. IBM is a global brand and has its presence in 170 countries and operates . 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. *Annuity death benefits are generally paid in a lump sum. 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. continues payments as long as one annuitant is alive. Skylar Clarine is a fact-checker and expert in personal finance with a range of experience including veterinary technology and film studies. The investor purchased accumulation units. D)Joint and last survivor annuity. Sample problems from Chapter 9 . The number of annuity units varies. II. *The customer, in the accumulation stage of the annuity, is holding accumulation units. C) It will stay the same. Distributed along a dermatome. Because the client is older than age 59-, he does not pay 10% premature distribution penalty tax. *Under the mortality guarantee, the insurance company assumes mortality risk by guaranteeing payments for life, though the amount of each payment is not guaranteed. The earnings on dollars invested into a variable annuity accumulate tax deferred, which is why variable annuities are popular products for retirement accumulation. Any withdrawals you make prior to the age of 59 may also be subject to a 10% tax penalty. Science Health Science Nursing. How Are Nonqualified Variable Annuities Taxed? A 3 These include white papers, government data, original reporting, and interviews with industry experts. 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. Which of the following statements regarding variable annuities are TRUE? 8 annuities provide a guaranteed rate of return, whereas annuities provide conservative to aggressive investments whose rates of return are not guaranteed. Reference: 12.1.2 in the License Exam. None of the other investments listed here offer tax-deferred growth. C) annuity units. A) Life-only annuity do not have a separate account C)3800. Ideally they should be funded with readily available cash rather than using funds liquidated from existing investments. She may choose to receive monthly payments for the rest of her life. A) Dow Jones Industrial Average. The accumulation period of a variable annuity may continue for many years. Do whatever you want with a Learn About Annuities and Their Myths - F&G: fill, sign, print and send online instantly. B) II and III. A variable annuity is a security and must be registered with the SEC, not FINRA. Question #38 of 48Question ID: 606798 Usually the term "annuity" relates to a contract between an individual and a life insurance company. Upon John's death during the accumulation period, Sue takes a lump-sum payment. C) Universal variable life policy. 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. On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity). B) allow customers to opt out of sharing of financial information with certain nonaffiliated firms. Which 2 of the 4 client profiles would a VA be LEAST suitable for? The number of variable annuity accumulation units can rise during the accumulation period when additional units are being purchased. a life insurance holder dies sooner than expected. D) I and IV In March, the actual net return to the separate account was 8%. A registered representative explaining variable annuities to a customer would be CORRECT in stating that: A)the state banking commission. Which Earns More: Variable or Fixed Annuities? D) the payout plans provide the client income for life. Because this is not guaranteed, the policyowner bears the investment risk. For this potential advantage, the investor, rather than the insurance company, assumes the investment risk. If you need to withdraw money from the account because of a financial emergency, you may face surrender fees. Practice all cards. *Payments from a variable annuity depend on the securities' value in the separate account's underlying investment portfolio. A 45-year-old investor takes a lump-sum distribution from a nonqualified variable annuity. B) The proceeds minus John's cost basis taxed as ordinary income at Sue's tax rate. As part of the registration requirements, a prospectus must be filed and distributed to prospective investors. 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. Word bank:Fixed, Variable Fixedannuities provide a guaranteed rate of return, whereas Variableannuities provide conservative to aggressive investments whose rates of return are not guaranteed. *An immediate annuity has no accumulation period. This makes a total of $4,000 tax and penalty paid on the random withdrawal. Policyholders . C)the number of annuity units is fixed, and their value remains fixed. This recommendation is: D) unsuitable because her situation exposes her to surrender charges and early withdrawal penalties in exchange for insufficient benefits. In this case, the investor is taking a lump-sum distribution before reaching age 59- and must pay an additional 10% penalty on the taxable amount. D)It cannot be determined until the April return is calculated. In deciding whether to put money into a variable annuity versus some other type of investment, its worth weighing these pros and cons. A variable annuity's separate account is: A separate account will invest in a number of different securities. 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. Variable annuity salespeople must register with all of the following EXCEPT: 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. III) A hierarchy of corporate staff evaluates divisions' plans and performance. A Variable Annuity has which of the following characteristics? This compensation may impact how and where listings appear. D) A 10% penalty plus the payment of ordinary income tax on funds withdrawn in excess of the owner's basis. A)III and IV. C) III and IV C)Variable annuity contract with a discussion regarding interest rate risk If an investor has purchased an immediate variable annuity, which of the following statements best describe the investment? In the case of deferred annuities, this is often referred to as the accumulation phase. Round to the nearest hundredth of a percent. *Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. *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. B) The entire $10,000 is taxable as ordinary income. The entire amount is taxed as ordinary income. The upside was the possibility of higher returns during the accumulation phase and a larger income during the payout phase. Investopedia does not include all offers available in the marketplace. required to be located off of the company's premises. A) It will be higher. 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.

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