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In addition, if the customer is not at least 59-, there will be a tax penalty of an additional 10%. \hspace{7pt} b. January 444, to record the employers payroll taxes on the payroll to be paid on January 444. D) Growth mutual funds. Annuities basics | III D) Joint and last survivor annuity. A)unsuitable because the return on something as conservative as a variable annuity tends to be low. Herpes Zoster has all of the following characteristics except: D)suitable if she has enough equity in the home to fund the variable annuity without cashing out the other VA contract, Based on the information given in the question, the VA recommendation would not be suitable. In March, the actual net return to the separate account was 8%. is required by the Securities Act of 1933. C) value of underlying securities held in the separate account. C)Variable annuity contract with a discussion regarding interest rate risk I. is required by the Securities Act of 1933. A) I and III. B) the safety of the principal invested. *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. If the contract holder dies before the period expires, the remaining payments are made to the beneficiary. Question #28 of 48Question ID: 606821 A)contact the issuer of the clients existing VA contract to facilitate the clients surrender of the contract. The Project Gutenberg eBook of Memoirs of Extraordinary Popular IBM Noida, Uttar Pradesh, India1 month agoBe among the first 25 applicantsSee who IBM has hired for this roleNo longer accepting applications. an annuitant lives 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. If this client is in the payout phase, how would his April payment compare to his March payment? C) II and III. With regard to a variable annuity, all of the following may vary EXCEPT: An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are. Annuities | FINRA.org B) fixed payments for 10 years, followed by variable payments for life. He wants to ensure that the client, in addition to meeting suitability requirements, is aware of certain variable annuity contract characteristics. 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. One of the following would achieve that objective but a suitability discussion regarding it's risk should also occur. *Variable annuity contracts were devised to help investors keep pace with inflation. A registered person recommends the purchase of a variable annuity to one of his clients. Expert Answer. The owner of a variable annuity has all of the following rights EXCEPT the right to vote: a. for the Board of Trustees b. to change the separate account's investment objective c. for distributing income and capital gains d. for dissolutions of the trust for distributing income and capital gains. A) Only during the payout period. must be filed with FINRA. B)Life annuity with period certain. B) life income IBM hiring Practitioner- Policy Admin in Noida, Uttar Pradesh, India You can buy an annuity with either a lump sum or a series of payments, and the accounts value will grow accordingly. Question #47 of 48Question ID: 606813 A) Life-only annuity C) It will stay the same. D) 4200. A) I and II A)III and IV. 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 A) waiver of premium B)It will be lower. Question #15 of 48Question ID: 606804 The holder of a variable annuity receives the largest monthly payments under which of the following payout options? A) a minimum rate of return is guaranteed. Fixed Annuity: A fixed annuity is a type of annuity contract that allows for the accumulation of capital on a tax-deferred basis. A)exempt from taxes A)number of annuity units. D) accumulation shares. Contributions to a nonqualified variable annuity are not tax deductible. When the first party dies, the annuity payment is made to the survivor. These contracts come with high surrender charges. Her agent recommended she choose a variable annuity as a safe haven for the funds. D) the yield is always higher than mortgage yields. D) each annuity unit's value varies with time, but the number of annuity units is fixed. The number of annuity units is fixed at the time of annuitization. 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. An annuitant assumes the investment risk of a variable annuity and is not protected by the insurance company from capital losses. Only variable annuities have payout plans that provide the client income for life. If an investor has a fixed-annuity contract with an insurance company, which of the following risks is assumed by the investor? The tax on this is $2,800 ($10,000 x 28%). C)III and IV. A) partially a tax-free return of capital and partially taxable. 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 . Variable annuities were introduced in the 1950s as an alternative to fixed annuities, which offer a guaranteedbut often lowpayout during the annuitization phase. Question #36 of 48Question ID: 606805 III. An investor who purchases a fixed annuity contract assumes purchasing-power risk. variable An immediate annuity consists of a Single Premium T has an annuity that guarantees an income payment for the rest of his life. A)Joint tenants annuity. *Insurance companies introduced the variable annuity as an opportunity to keep pace with inflation. A joint life with last survivor contract covers multiple annuitants and ceases payments at the death of the last surviving annuitant. A) a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero Question #20 of 48Question ID: 606808 A)II and IV. An accumulation unit in a variable annuity contract is: *The number of variable annuity accumulation units can rise during the accumulation period when additional units are being purchased. Once a customer annuitizes a variable annuity, which of the following statements are TRUE? 2019 Ted Fund Donors The growth portion is taxed as a capital gain. All of the following are characteristics of Variable Annuity contracts EXCEPT The possibility of higher returns and greater income than fixed annuities, but there's also a risk that the account will fall in value A There are no surrender fees B Guaranteed death benefit C Tax deferred growth D Training Explanations D)A 10% penalty plus the payment of ordinary income tax on funds withdrawn in excess of the owner's basis. A) variable annuities offer the investor protection against capital loss. used for the investment of funds paid by contract holders. Every annuity has some characteristics in common. The value of the customer's account is converted into annuity units if and when the customer decides to annuitize the contract. B) The entire $10,000 is taxable as ordinary income. The owner of a variable annuity has all of the following rights EXCEPT D) 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. PGIM Fixed Income has over $900 billion in assets under management across a broad array of fixed . *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 return on a variable annuity is not guaranteed; it is determined by the underlying portfolio's value. 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 The paper publication will not be rereleased. B) The proceeds minus John's cost basis taxed as ordinary income at Sue's tax rate. Assuming that the payroll for the last week of the year is to be paid on January 444 of the following fiscal year, journalize the following entries: A)II and IV. Carefully look at your options when choosing an annuity. D) reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. Investopedia does not include all offers available in the marketplace. Which of the following statements is not true about the characteristics of a trend? B) II and III. \hspace{10pt} Federal unemployment (employer only), 0.8%0.8\%0.8%. During the accumulation phase, you make purchase payments. Deferred Annuity Definition, Types, How They Work, What Is a Fixed Annuity? D) I and IV. 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? 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. The $30,000 contract value represents $10,000 of contributions and $20,000 of earnings. The tax on this amount is $3,000. No, annuities are not FDIC-insured as they are not bank products. Variable Annuities Flashcards - Cram.com B)I and III. These contracts come with high surrender charges. The number of annuity units becomes fixed when the contract is annuitized; it is the value of each unit that fluctuates. FINRA. B)I and III. Which of the following recommendations would best meet the customer profile? *The accumulation period of a variable annuity may continue for many years. C)with guaranteed minimum withdrawal benefits (GMWBs) the periodic payments can be monthly, quarterly or annually 7 - Annuities Flashcards | Quizlet In deciding whether to put money into a variable annuity versus some other type of investment, its worth weighing these pros and cons. This would not align with the couple's criteria for coverage as long as they both live. A) II and IV. A. Prudential's businesses offer a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds, asset management, and real estate services. B) single payment deferred annuity. A rider or statement of condition that allows a variable life insured to maintain policy coverage after becoming disabled is a benefit known as must precede every sales presentation. B) II and III D)Variable annuity contract with a discussion regarding legislative risk, A VA with its investments in the separate account subject to market risk would not align with the customer's objective. **Because common stocks are not fixed dollar investments, they have the opportunity to keep pace with inflation. Suggesting that loans or drawing equity from a home to fund VA contracts have also been targeted as abusive sales practices. D)Investment risk. The value of the annuity units varies. He originally invested $29,000 4 years ago; it now has a value of $39,000. Shortening the Securities Transaction Settlement Cycle B) II and IV. Reference: 12.1.1 in the License Exam. The minimum guaranteed death benefit is provided by that portion of the payment invested in the insurance company's general account. 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: In a variable annuity contract, the provision that guarantees the annuitant payments for life is called the: A) II and III. *When money is deposited into the annuity, it is purchasing accumulation units. C) A 10% penalty plus the payment of ordinary income tax on all of the funds withdrawn. 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. Generally, a life-only contract pays the most per month because payments cease at the annuitant's death. *An immediate annuity has no accumulation period. \text{Salaries:} && \text{Deductions:}\\ 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. Practice all cards. Consequently, the client pays taxes only on the growth portion of the withdrawal ($10,000). Reference: 12.2.1 in the License Exam. The money paid in will be returned tax free, but the earnings portion will be taxed as ordinary income. D)the rate of return is determined by the underlying portfolio's value. Portfolio Compliance Risk Analyst Job in Newark, NJ at Prudential D)the state insurance department. C) The ordinary income on the proceeds over the cost basis plus 10% of the net gain (if any) if Sue is younger than 59- years old. She will receive the annuity's entire value in a lump-sum payment. C) with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed B) II and IV. 's dividend yield was % last year. Once the cost basis is reached, any further withdrawals are a nontaxable return of principal. B)100% taxable. How does an indexed annuity differ from a fixed annuity? The investor purchased accumulation units. C)suitable due to the death benefit features of a variable annuity. 6102..55.001) is being updated on an ongoing basis. Future annuity payments will vary according to the separate account's performance. B)corporate stock. Annuities are similar to other forms of investing in that the owner invests money with the hope that it will gain in value, but annuities also come with higher fees than most mutual funds. Therefore, ordinary income taxes will apply to the entire $10,000. A) not suitable Consequently, the client pays taxes only on the growth portion of the withdrawal ($10,000). On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity). covers more than one person. Reference: 12.1.4.2 in the License Exam. 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. They can be classified by: Nature of the underlying investment - fixed or variable In the case of deferred annuities, this is often referred to as the accumulation phase. no. For an insurance company, mortality risk turns out unfavorably if: D)money market funds. As part of the registration requirements, a prospectus must be filed and distributed to prospective investors. D) Capital gains tax on earnings exceeding basis. A) Fixed annuities. In addition, if the customer is not at least 59-, there will be a tax penalty of an additional 10%. Both products typically have a wide range of options across equities, bonds and money market instruments. For this potential advantage, the investor, rather than the insurance company, assumes the investment risk. How Good of a Deal Is an Indexed Annuity? C)II and IV. Which is it? A customer has contributed $1,000 a year for 10 years to his tax-deferred nonqualified variable annuity. *Contributions to a nonqualified annuity are made with the owner's after-tax dollars. The value of the separate account is now $30,000. Is F&G Annuities & Life Inc (FG) a Good Dividend Stock? | AAII 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. C) insurance companies keep variable annuity funds in separate accounts from other insurance products. 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. Variable annuities are designed to combat inflation risk. Fixed annuities pay a fixed monthly benefit which loses purchasing power if there is inflation. How to Rollover a Variable Annuity Into an IRA. The accumulation unit's value is used to calculate the total value of the account. B) I and III. An Immediate Annuity is designed to provide each of the following features, EXCEPT: The creation of an estate. are purchased primarily for their insurance features Question #24 of 48Question ID: 606806 She may choose to receive monthly payments for the rest of her life. D)an accounting measure used to determine payments to the owner of the variable annuity. No paper. Therefore, ordinary income taxes will apply to the entire $10,000. A) Life-only annuity B)a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero All of the following are accurate statements to make to the client EXCEPT A) I and III. 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. An 18-year-old, unmarried high school student sought a safe investment for a $30,000 bequest until after she graduated from college. Chapter 4: Annuities Flashcards | Chegg.com B)suitable regardless of funding sources *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. Periodic payments are not a consideration because normally the payments into an annuity are level or in a lump sum. The separate account performance compared to last month's performance. B) The policyowner. The number of accumulation units is always fixed throughout the accumulation period. 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. \hspace{7pt} b. December 303030, to record the employers payroll taxes on the payroll to be paid on December 313131. The number of accumulation units is always fixed throughout the accumulation period. a variable annuity guarantees an earnings rate of return. And, unlike a fixed annuity, variable annuities do not provide any guarantee that you will earn a return on your investment. A) A variable annuity The following are the characteristics or the hierarchy of a trend except A. Gigatrends C. Megatrends B. Macrotrends D. Nanotrends _____11. B)II and III. 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. Annual depreciation on the machine is$12,000, and the tax rate of the company is 25%. Reference: 12.2.1 in the License Exam. The funds are not liquid due to the surrender fees, and there is also a 10% penalty on withdrawals before age 59-. II. Of the answer choices given the best would be to reevaluate the recommendation based on the new information tendered by the client. This factor is used to establish the dollar amount of the first annuity payment. Fixed annuities. If at all you go deeper, then you will find a wide range of annuity products from a variety of companies. *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. \hspace{10pt} Social security, 6%6\%6% on first $100,000\$100,000$100,000 of employee annual earnings C)Mortality risk. C)III and IV. 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. *The return on a variable annuity is not guaranteed; it is determined by the underlying portfolio's value. The amount taxed is the amount of the lump-sum payment minus the deceased's cost basis in the investment. D) III and IV. D) I and III. C)the invested money will be professionally managed according to the issuers' investment objectives. A variable annuity's separate account is: A separate account will invest in a number of different securities. The accumulation period of a variable annuity may continue for many years. C) the yield is always higher than bond yields. A trend makes considerable influence or impact. An 18-year-old, unmarried high school student sought a safe investment for a $30,000 bequest until after she graduated from college. A client has purchased a nonqualified variable annuity from a commercial insurance company. Variable Annuities Flashcards | Quizlet A registered representative explaining variable annuities to a customer would be CORRECT in stating that: