D)II and III. Licensed to sell Variable Annuities in the following state(s): FL, TX . They offer broad diversification in the securities market and potential growth, all while using the power of tax deferral. Variable annuity Which of the following is characteristic of fixed annuities? A) Money market fund. IV. Reference: 12.1.2 in the License Exam. An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are. *During the payout period, payments are based on a fixed number of annuity units established when the contract was annuitized. In March, the actual net return to the separate account was 8%. an annuitant dies sooner than expected. D) None, because it is the proceeds from a life insurance company. I. III. The holder of a variable annuity receives the largest monthly payments under which of the following payout options? D) I and IV. C) I and III. Changes in payments on a variable annuity correspond most closely to fluctuations in the: Universal variable life policies $63,000 b.$51,000 c. $18,000 d.$6,000. The annuitized payments are viewed for tax purposes as An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are. II) It has an internal capital market wherein each division competes for funds. The annuity unit's value represents a guaranteed return. IBM Noida, Uttar Pradesh, India1 month agoBe among the first 25 applicantsSee who IBM has hired for this roleNo longer accepting applications. A) changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. On an annual basis, the machine will produce 20,000 units with an expected selling price of $10, prime costs of$6 per unit, and a fixed cost allocation of $3 per unit. \hspace{7pt} b. January 444, to record the employers payroll taxes on the payroll to be paid on January 444. B)a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero Variable annuities grow tax-deferred, so you dont have to pay taxes on any investment gains until you begin receiving income or make a withdrawal. D)It cannot be determined until the April return is calculated. What Are the Risks of Annuities in a Recession? Of the total payroll for the last week of the year, $30,000\$30,000$30,000 is subject to unemployment compensation taxes. D)value of accumulation units. The value of the separate account is now $30,000. 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. B)I and II A) a minimum rate of return is guaranteed. B)fixed in value until the holder retires. C) II and III. If an investor has purchased an immediate variable annuity, which of the following statements best describe the investment? C) II and IV. A) I and III. B) Life annuity with period certain Question #28 of 48Question ID: 606821 The growth portion is taxed as a capital gain. A 45-year-old investor takes a lump-sum distribution from a nonqualified variable annuity. Which of the following statements regarding variable annuities are TRUE? B)II and III. \hspace{10pt} \text{Sales salaries} & \$\hspace{5pt} 670,000 & \hspace{10pt} \text{Income tax withheld} & \$198,744\\ *Contributions to a nonqualified annuity are made with the owner's after-tax dollars. On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity). Variable annuities gave buyers a chance to benefit from rising markets by investing in a menu of mutual funds offered by the insurer. A variable annuity does not guarantee an earnings rate because earnings will depend on the performance of the separate account. A)Purchasing power risk. The value of the annuity units varies. But again, the need to designate beneficiaries is not an issue for this annuitant. The number of annuity units is fixed. Question #36 of 48Question ID: 606805 Job Classification: Corporate - Legal and Compliance. D) accumulation shares. Fixed annuities, on the other hand, provide a guaranteed return. Because they have a separate account in which the investor assumes the investment risk, they can only be sold by individuals with both insurance and securities licenses. An annuity factor is taken from the annuity table, which considers, for example, the investor's sex and age. D) periodic payment deferred annuity. Therefore, ordinary income taxes will apply to the entire $10,000. Any withdrawals you make prior to the age of 59 may also be subject to a 10% tax penalty. Full-Time. Home; About. B) Corporate debt securities A customer has contributed $1,000 a year for 10 years to his tax-deferred nonqualified variable annuity. This customer has no spouse or dependents, which negates the value of the death benefit. A rider or statement of condition that allows a variable life insured to maintain policy coverage after becoming disabled is a benefit known as A) II and III. Contributions to an IRA may be tax deductible, depending on the individual's earnings and participation in a company-sponsored qualified retirement plan. A fixed annuity is an insurance contract that pays a guaranteed rate of interest on the owner's contributions and later provides a guaranteed income. For this potential advantage, the investor, rather than the insurance company, assumes the investment risk. D) II and IV. Which of the following are defined as securities? A 58-year-old individual near retirement who is in good health and anticipates a lengthy retirement A)exempt from taxes Reference: 12.2.1 in the License Exam. A) 2800. An investor who purchases a fixed annuity contract assumes purchasing-power risk. Variable annuities involve underlying equity investments in a separate account. Before buying a variable annuity, investors should carefully read the prospectus to try to understand the expenses, risks, and formulas for calculating investment gains or losses. D)I and III. Because this is not guaranteed, the policyowner bears the investment risk. Variable annuity salespeople must register with all of the following EXCEPT: Which of the following are defined as securities? D)variable annuities. C) Mutual fund portfolio consisting of blue chip stocks A security is any investment for profit with management performed by a third party. Round to the nearest hundredth of a percentile. Your customer in his early 30s has received a modest inheritance from a relative. Ideally they should be funded with readily available cash rather than using funds liquidated from existing investments. He originally invested $29,000 4 years ago; it now has a value of $39,000. That can adversely affect your returns over the long term, compared with other types of investments. D) II and IV. Suggesting that loans or drawing equity from a home to fund VA contracts have also been targeted as abusive sales practices. Future annuity payments will vary according to the separate account's performance. Annuities: How to Find the Right One for You, How a Fixed Annuity Works After Retirement, Pros and Cons of Indexed Universal Life Insurance. B) the client may vote for the board of directors or board of managers. During payout, distributions will fluctuate due to performance in the separate account. C)A 10% penalty plus the payment of ordinary income tax on all of the funds withdrawn. An accumulation unit in a variable annuity contract is: A prospectus for a variable annuity contract: 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. His objective is monthly income that he can receive after he retires to supplement his small pension and social security benefits. \hspace{10pt} Social security, 6%6\%6% on first $100,000\$100,000$100,000 of employee annual earnings How is the distribution taxed? A) two people are covered and payments continue until the second death. Question #43 of 48Question ID: 606809 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. D) I and IV. Herpes Zoster has all of the following characteristics except: Group of answer choices. 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. Uses in Investing, Pros, and Cons, Indexed Annuity: Definition, How It Works, Yields, and Caps. A 45-year-old employed individual with no other retirement accounts in place A customer has contributed $1,000 a year for 10 years to his tax-deferred nonqualified variable annuity. **Because common stocks are not fixed dollar investments, they have the opportunity to keep pace with inflation. 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. a. A) Ordinary income tax on earnings exceeding basis. B) I and II. Question #22 of 48Question ID: 606803 D) value of accumulation units. The AG49-A Revisions a life insurance holder dies sooner than expected. The growth portion is taxed as ordinary income. Contributions to a nonqualified annuity are made with the owner's after-tax dollars. D) Joint and last survivor annuity. The value of accumulation and annuity units varies with the investment performance of the separate account. Distribution of dividends occurs during the accumulation period. The entire amount is taxed as ordinary income. C)I and IV. A)not suitable D) A 10% penalty plus the payment of ordinary income tax on funds withdrawn in excess of the owner's basis. Immediate life annuity with 10-year period certain. The downside was that the buyer was exposed to market risk, which could result in losses. All of the following investment strategies offer either fully or partially tax-deductible contributions to individuals who meet eligibility requirements EXCEPT: The return on a variable annuity is not guaranteed; it is determined by the underlying portfolio's value. The investor has already paid tax on the contributions but the earnings have grown tax-deferred. B) IPO. U.S. Securities and Exchange Commission. C) 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 purchased accumulation units. C)II and III. *The owner of a life annuity with 10-year period certain will receive payments for life, subject to a minimum of 10 years. C) insurance guarantee. 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. Which of the following recommendations would best meet the customer profile? In deciding whether to put money into a variable annuity versus some other type of investment, its worth weighing these pros and cons. Annuities due are a type of annuity where payments are made at the beginning of each payment period. C) Unit refund life option B) A 30 year old construction worker recently unemployed who wants to invest his severance pay amounting to 9 months salary. This would not align with the couple's criteria for coverage as long as they both live. the state banking commission. C) number of accumulation units. A customer has an investment objective of keeping pace with inflation while assuming moderate risk. A guaranteed lifetime annuity promises to pay the owner an income for the rest of their life. U.S. Securities and Exchange Commission. 's dividend yield was % last year. C) II and III. A 3 B) 10% penalty plus payment of ordinary income tax on all funds withdrawn. C)II and IV. B) I and III. Vaccine has decreased the incidence. *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. C) such an annuity is designed to combat inflation risk. B) variable annuities are classified as insurance products. A) a variable annuity contract will provide a fluctuating monthly check upon the annuitization of the contract 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. A) Life-only annuity A) defined contribution plans. B) I and II. Reference: 12.1.1 in the License Exam. D) I and III. Distributed along a dermatome. Annuity death benefits are generally paid in a lump sum. 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. Reference: 12.1.2.1.1. in the License Exam. B) the state insurance department. D)an accounting measure used to determine payments to the owner of the variable annuity. B)It will be lower. Reference: 12.3.3 in the License Exam, Question #34 of 48Question ID: 606834 An Immediate Annuity is designed to provide each of the following features, EXCEPT: The creation of an estate. A variable annuity is a security and must be registered with the SEC, not FINRA. C) It will stay the same. 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. Round to the nearest hundredth of a percent. The fixed payment that the annuitant receives loses purchasing power over time as a result of inflation. Once annuitized, the number of annuity units does not vary. \end{array} During the accumulation phase, the number of accumulation units will increase as additional money is invested. *During the accumulation phase, the number of accumulation units will increase as additional money is invested. A) I and IV. C) I and IV. can be sold by someone with only an insurance license The second phase is triggered when the annuity owner asks the insurer to start the flow of income, often referred to as the payout phase. A guaranteed death benefit guarantees that the beneficiary will receive a death benefit if the annuitant dies before the annuity begins paying benefits. b. The number of annuity units becomes fixed when the contract is annuitized; it is the value of each unit that fluctuates. Reference: 12.3.3 in the License Exam. D)0. The beneficiary is taxed at ordinary income rates during the year the lump sum is received. C) III and IV A) I and II D) Keogh plans. A customer is receiving annuitized payments from a variable annuity. However, at the end of the period certain the payments to the named beneficiary (the spouse) will stop. A) II and IV. the state insurance commission. variable annuity without paying tax at the time of the transfer. The number of accumulation units can rise during the accumulation period. D) each annuity unit's value varies with time, but the number of annuity units is fixed. The $30,000 contract value represents $10,000 of contributions and $20,000 of earnings. However, a discussion should occur regarding the risks that are associated with a fixed annuity; purchasing power risk. A) mortality guarantee. When a partial withdrawal is made from an annuity, the earnings are considered to be taken out first for tax purposes (or LIFO). An individual retirement annuity is an investment vehiclesimilar to an individual retirement accountthat is offered by insurance companies. A)II and III. During the . D) Growth mutual funds. D) II and III. The growth portion is subject to a 10% penalty. Variable annuity salespeople must register with all of the following EXCEPT: 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 Fixed annuities typically earn at a lower, stable rate. 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. . On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity). D) I and III. used for the investment of funds paid by contract holders. A joint-and-last-survivor annuity is a payout option where: All of the following are characteristics of a variable annuity, except: a. A)variable annuities may only be sold by registered representatives. The value of the separate account is now $30,000. B) allow customers to opt out of sharing of financial information with certain nonaffiliated firms. C)Keogh plans. Variable Annuities. C) single payment immediate annuity. D) Variable annuities. D) the number of annuity units becomes fixed when the contract is annuitized. A)Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. B) the safety of the principal invested. A)Fixed annuity contract with a discussion regarding purchasing power risk A) mutual fund units. The number of accumulation units is always fixed throughout the accumulation period. must precede every sales presentation. C) 10% penalty plus payment of ordinary income tax on all funds withdrawn exceeding basis. C) A 10% penalty plus the payment of ordinary income tax on all of the funds withdrawn. If the contract holder dies before the period expires, the remaining payments are made to the beneficiary. Can I Borrow from My Annuity for a House Down Payment? B) payment guarantee. Supplemental income stream for retirement, not preservation of capital should be the catalyst to consider a VA and for anyone who may need access to the sum invested for any reason a VA would not be considered a suitable recommendation. Based on this information the RR should: A) 2800. A)Fixed annuities. The number of accumulation units can rise during the accumulation period. C)100% tax deferred. When the first party dies, the annuity payment is made to the survivor. The value of the customer's account is converted into annuity units if and when the customer decides to annuitize the contract. An annuity payment is the dollar amount of the equal periodic payment in an annuity environment. B)a majority vote from the shareholders is required to change the investment objectives. Your 55-year-old client invested $50,000 four years ago in a nonqualified variable annuity. D) tax free. Random withdrawals do not guarantee how long the money will last because large withdrawals can deplete the funds before the annuitant dies. An accumulation unit in a variable annuity contract is: A)an accounting measure used to determine the contract owner's interest in the separate account. A) The fact that the annuity payment may increase or decrease. Question #32 of 48Question ID: 606815 Science Health Science Nursing. Immediate life annuity. B) Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. The tax on this is $2,800 ($10,000 x 28%). Reference: 12.1.1 in the License Exam. This recommendation is: Deferred Annuity Definition, Types, How They Work, What Is a Fixed Annuity? Travel Times Journal found that the average per person cost of a 10-day trip along the Pacific coast, per person, is $1,015. B)100% taxable. In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. A) Ordinary income tax on earnings exceeding basis. C) suitable regardless of funding sources *Universal variable life policies are insurance company products that should be purchased primarily for the insurance features they offer rather than as an investment. B) 100% taxable. A)II and IV. A) waiver of premium Who assumes the investment risk in a variable annuity contract? 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. D) Variable annuities. B)reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. For example, when paying rent, the rent payment (PMT) . 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. As part of the registration requirements, a prospectus must be filed and distributed to prospective investors. 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? C) none of these. All of the following investment strategies offer either fully or partially tax-deductible contributions to individuals who meet eligibility requirements EXCEPT: Variable Annuity Advantages and Disadvantages, Guide to Annuities: What They Are, Types, and How They Work. A) Joint tenants annuity. 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. II. covers more than one person. C) early annuity phase-in For a retired person, which of the following investments would provide the greatest protection against inflation? A)It will stay the same. The separate account performance compared to an assumed interest rate. B)FINRA. B) the rate of return is determined by the underlying portfolio's value. D)Investment risk. vote on proposed changes in investment policy. Because the client is older than age 59-, he does not pay 10% premature distribution penalty tax. A the safety of the principal invested B the yield is always higher than bond yields. Nicks Enterprises has purchased a new machine tool that will allow the company to improve the efficiency of its operations. MetLife offers a comprehensive benefits program, including healthcare benefits, life insurance, retirement benefits, parental leave, legal plan services and paid time off. \hspace{7pt} a. December 303030, to record the payroll. The payout compared to the initial payout upon annuitization. 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. Distributions to the annuitant will fluctuate during the payout period. Guaranteed Lifetime Annuity: How They Work, When They Pay You, This is also generally true of retirement plans. D) III and IV. D)A variable annuity, Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. An annuity is a continuous stream of equal periodic payments from one party to another for a specified period of time to fulfill a financial obligation.