All of the following investment strategies offer either fully or partially tax-deductible contributions to individuals who meet eligibility requirements EXCEPT: An investor who has purchased a nonqualified variable annuity has the right to: What percentile is represented by $710? 6102.0.55.001 - Labour Statistics: Concepts, Sources and Methods, Dec 2005 A variable annuity is a combination of 2 products: an insurance contract and a mutual fund. *Fixed income instruments, like bonds and fixed annuities, are subject to purchasing power risk. 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. Your 55-year-old client invested $50,000 four years ago in a nonqualified variable annuity. 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. D) a minimum of 10 years of variable payments, followed by additional variable payments for life. C)III and IV Which is it? A)I and IV. Question #15 of 48Question ID: 606804 The remainder of the premium is invested in the separate account. Question #36 of 48Question ID: 606805 Reference: 12.3.3 in the License Exam. C) annuity units. Reference: 12.1.2.1.2 in the License Exam. A) two people are covered and payments continue until the second death. Here is how guaranteed lifetime annuities work. The earnings on dollars invested into a variable annuity accumulate tax deferred, which is why variable annuities are popular products for retirement accumulation. B) payments continue until the death of the primary owner. must be filed with FINRA. They are also riddled with fees, which can cut into profits. His objective is monthly income that he can receive after he retires to supplement his small pension and social security benefits. How Good of a Deal Is an Indexed Annuity? C) Life annuity with period certain. A) not suitable During the . C) II and IV. C)III and IV. 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. Essential Characteristics: C) 3000. \hspace{7pt} b. January 444, to record the employers payroll taxes on the payroll to be paid on January 444. All of the following statements about variable annuities are true EXCEPT: The funds are not liquid due to the surrender fees, and there is also a 10% penalty on withdrawals before age 59-. A) waiver of premium A trend makes considerable influence or impact. C) III and IV. We also reference original research from other reputable publishers where appropriate. Reference: 12.1.2.1.1. in the License Exam. The accumulation unit's value is used to calculate the total value of the account. The owner of a life annuity with 10-year period certain will receive payments for life, subject to a minimum of 10 years. \hspace{10pt} Medicare, 1.5%1.5\%1.5% No software installation. *As contributions are made with after-tax dollars, only the earnings generated are taxed on withdrawal. *The number of variable annuity accumulation units can rise during the accumulation period when additional units are being purchased. A) The entire amount is taxed as ordinary income, because it is not life insurance. D)an accounting measure used to determine payments to the owner of the variable annuity. No Hibernation for Issuers of Index-Linked Variable Annuities and Index A customer has a nonqualified variable annuity. An individual retirement annuity is an investment vehiclesimilar to an individual retirement accountthat is offered by insurance companies. C) taxed as ordinary income only to the extent of earnings. In addition, if the customer is not at least 59-, there will be a tax penalty of an additional 10%. All of the following are accurate statements to make to the client EXCEPT A)variable annuities will protect an investor against capital loss. The nature of the securities invested in-bonds and growth stocks-makes it necessary that sales representatives and their principals be licensed in securities as well as insurance. Who assumes the investment risk in a variable annuity contract? 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. C) II and III. II. When a variable annuity contract is annuitized, the number of annuity units is fixed. Explain what is meant by positive and negative The number of annuity units becomes fixed when the contract is annuitized; it is the value of each unit that fluctuates. For this potential advantage, the investor, rather than the insurance company, assumes the investment risk. 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. is required by the Securities Act of 1933. Fixed annuities, on the other hand, provide a guaranteed return. The payout of an annuitized variable annuity account changes from month to month in a manner determined by which of the following? Future annuity payments will vary according to the separate account's performance. \end{array} This would not align with the couple's criteria for coverage as long as they both live. D) Variable Annuity. This role is also eligible for annual short-term incentive compensation. regulated under both securities and insurance laws. A single lump-sum investment is made, and payments begin immediately, since the investor has purchased annuity units. C) II and III. Round to the nearest hundredth of a percentile. A) periodic payment immediate annuity. D) II and III. The Project Gutenberg eBook of Memoirs of Extraordinary Popular C)Growth mutual funds Annuities are complicated products, so that may be easier said than done. An annuity is an insurance product that promises to pay out income at a future date based on invested funds. D) III and IV. C) A 25year old public school teacher who would like to save enough for the purchase of her first home within the next 3 to 5 years. Random withdrawals do not guarantee how long the money will last because large withdrawals can deplete the funds before the annuitant dies. At the end of the year your account has a value of 10750. Which of the following is NOT associated with characteristics of shares C) A 10% penalty plus the payment of ordinary income tax on all of the funds withdrawn. A passion for serving customers and a personal commitment to following through in a dynamic, fast-paced environment. Distributions to the annuitant will fluctuate during the payout period. D)money market funds. The growth portion is taxed as ordinary income. Withdrawals from a nonqualified variable annuity are made on a LIFO basis, so the taxable earnings are considered taken out before principal. D) 4200. A)accumulation shares. A) two people are covered and payments continue until the second death. For example, if the income is monthly, the first payment comes one month after the immediate annuity is bought. B)fixed in value until the holder retires. If an investor has a fixed-annuity contract with an insurance company, which of the following risks is assumed by the investor? You purchase a variable annuity contract by making either a single purchase payment or a series of purchase payments. A) I and IV. How is the distribution taxed? & \underline{\underline{\$1,014,000}} & \hspace{10pt} \text{U.S. savings bonds} & 30,420\\ The value of the separate account is now $30,000. Variable Annuity: Definition and How It Works, Vs. Fixed Annuity The number of annuity units rises once annuitization begins. *Contributions to a nonqualified variable annuity are not tax deductible. are purchased primarily for their insurance features The client's investment objectives, tax bracket, investment experience and risk tolerance all align well with a VA recommendation. John is the annuitant in a variable plan, and Sue is the beneficiary. Distribution can take place before or during any solicitation for sale. *A variable annuity does not guarantee an earnings rate because earnings will depend on the performance of the separate account. B) variable annuities are classified as insurance products. Once a customer annuitizes a variable annuity, which of the following statements are TRUE? In March, the actual net return to the separate account was 8%. Reference: 12.1.2 in the License Exam. Determine whether the following events are independent or dependent. $63,000 b.$51,000 c. $18,000 d.$6,000. D) Age 27, saving for first home. C)Mortality risk. D)each annuity unit's value is fixed, but the number of annuity units varies with time. Reference: 12.1.4.1 in the License Exam. 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. Deal with mathematic Math is all about solving equations and finding the right answer. A 3 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. *Distributions from a nonqualified plan represent both a return of the original investment made in the plan with after-tax dollars (a nontaxable return of capital) and the income from that investment. If the contract holder dies before the period expires, the remaining payments are made to the beneficiary. With variable annuities policyholders can choose from a number of investment opportunities. withdraw funds without any tax consequences. Registration with FINRA is de facto registration with the SEC; no registration is required by the state banking commission. C) suitable regardless of funding sources The customer, in the accumulation stage of the annuity, is holding accumulation units. D) 100% tax deferred. D) Variable annuity. 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. A)the state banking commission. used for the investment of funds paid by contract holders. Rolling two 222s followed by one 666 on three tosses of a fair die, Use the table 1 and table 2 to complete the table 3 B) The entire $10,000 is taxable as ordinary income. Simple and general annuities problems with solutions 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. A) Fixed annuities. Once annuitized, the number of annuity units does not vary. Upon John's death during the accumulation period, Sue takes a lump-sum payment. C)The entire $10,000 is taxable as ordinary income. D) an accounting measure used to determine the contract owner's interest in the separate account. A variable annuity is a type of annuity contract in which the value can vary based on the performance of an u . If an investor has a fixed-annuity contract with an insurance company, which of the following risks is assumed by the investor? C) the yield is always higher than bond yields. C)earnings only and taxable B) the safety of the principal invested. A) Any tax due is deferred. 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. D)Dow Jones Industrial Average. B) accumulation units. P=525p2+65,326p185,000E=326p+185,000P=-525 p^{2}+65,326 p-185,000 \quad E=-326 p+185,000P=525p2+65,326p185,000E=326p+185,000. Refinancing a home to draw out equity has been identified by FINRA as an abusive sales tactic regarding the sales of VAs. Annuity units are units of ownership when the contract is in the payout stage. III) A hierarchy of corporate staff evaluates divisions' plans and performance. B)I and III. 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. B) be paid to any legal heirs as recognized by the annuitant's state of domicile. A) defined contribution plans. D)I and IV, Universal variable life policies are insurance company products that should be purchased primarily for the insurance features they offer rather than as an investment. *During the payout period, payments are based on a fixed number of annuity units established when the contract was annuitized. a variable annuity does not guarantee an earnings rate of return. Question #18 of 48Question ID: 606827 C) II and III. Licensed to sell Variable Annuities in the following state(s): FL, TX . B)each annuity unit's value varies with time, but the number of annuity units is fixed. B) The policyowner. The return on a variable annuity is not guaranteed; it is determined by the underlying portfolio's value. Once the cost basis is reached, any further withdrawals are a nontaxable return of principal. C)I and IV. D) Growth mutual funds. All of the following statements regarding variable annuities are true EXCEPT: A 10% penalty applies only if distributions begin before age 59-. (primary needs). savingsbondsGroupinsurance$198,74451,71415,21030,42045,630$341,718, Tax rates assumed: a variable annuity guarantees payments for life. The most suitable option and one considered effective for married couples is a single joint and last survivor contract. C) Mutual fund portfolio consisting of blue chip stocks C) Unit refund life option C) There is no tax as the withdrawal is considered return of capital. D)separate account may consist of mutual funds. The tax on this is $2,800 ($10,000 x 28%). When a variable annuity contract is annuitized, the number of annuity units is fixed. B) The death benefit cannot ever be more than the guaranteed benefit. D) minimum guaranteed death benefit. However, at the end of the period certain the payments to the named beneficiary (the spouse) will stop. Annuity death benefits are generally paid in a lump sum. Which of the following statements regarding variable annuities are TRUE? Reference: 12.3.3 in the License Exam. LESSON 7: ANNUITIES - FIXED AND VARIABLE - course.uceusa.com Question #28 of 48Question ID: 606821 The payout compared to the initial payout upon annuitization. B) the client may vote for the board of directors or board of managers. The value of the annuity units varies. *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. 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. The client's investment objectives, tax bracket, investment experience and risk tolerance all align well with a VA recommendation. D)A variable annuity, Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. Reference: 12.3.4 in the License Exam, Chapter 16: U.S. Government and State Rules a, Chapter 17: Other SEC and SRO Rules and Regul, Chapter 15: Ethics, Recommendations, and Taxa, Chapter 13: Direct Participation Programs, Fundamentals of Financial Management, Concise Edition, Joe B. Hoyle, Thomas F. Schaefer, Timothy S. Doupnik, Carl Warren, James M Reeve, Jonathan E. Duchac. 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. C)such an annuity is designed to combat inflation risk. He makes several statements regarding the contract. The minimum guaranteed death benefit is provided by that portion of the payment invested in the insurance company's general account. D)Variable annuity. order now. A) Only during the payout period. B)unsuitable because her situation exposes her to surrender charges and early withdrawal penalties in exchange for insufficient benefits. The $30,000 contract value represents $10,000 of contributions and $20,000 of earnings. An annuity payment is the dollar amount of the equal periodic payment in an annuity environment. *When money is deposited into the annuity, it is purchasing accumulation units. 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 operate in similar ways to . Any withdrawals you make prior to the age of 59 may also be subject to a 10% tax penalty. A) a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero B)a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero The company's well-known Rock symbol is an icon of strength, stability, expertise and innovation that has stood the test of time. Contributions to a nonqualified variable annuity are not tax deductible. As part of the registration requirements, a prospectus must be filed and distributed to prospective investors. Question #42 of 48Question ID: 606830 Before the contract is annuitized, your client, currently age 60, withdraws some funds for personal purposes. \hspace{7pt} a. December 303030, to record the payroll. B) Life annuity with period certain C) II and IV. When the first party dies, the annuity payment is made to the survivor. Guaranteed Lifetime Annuity: How They Work, When They Pay You, This is also generally true of retirement plans. Reference: 12.1.2 in the License Exam. B) 10% penalty plus payment of ordinary income tax on all funds withdrawn. B) the state insurance department. Reference: 12.1.4.1 in the License Exam. B)Fixed annuity contract with a discussion regarding timing risk *Accumulation units represent units of ownership in a life insurance company's separate account when the contract is in the accumulation stage. There is no clear answer to this. Your client owns a variable annuity contract with an AIR of 4%. B)corporate stock. Your customer is interested in a variable annuity but is unclear on some of the details regarding different specifications and riders that can be attached to the contract. A 1 The applicant and possibly the agent initial any changes made. A)not suitable Your customer in his early 30s has received a modest inheritance from a relative. C) It will stay the same. && \hspace{10pt}\text{Group insurance} & \underline{45,630}\\ An investor owning which of the following variable annuity contracts would hold accumulation units? A) II and III. savingsbonds30,420Groupinsurance45,630$341,718\begin{array}{lrlr} Paraplanner / Marketing Support Specialist Job in Austin, TX A) Fixed Annuity *VAs are less suitable for individuals who have not yet made maximum contributions to other retirement accounts such as IRAs and 401ks. B)suitable regardless of funding sources Consequently, the client pays taxes only on the growth portion of the withdrawal ($10,000). However, it does guarantee payments for life (mortality). A) I and II covers more than one person. The value of the customer's account is converted into annuity units if and when the customer decides to annuitize the contract. What Are the Distribution Options for an Inherited Annuity? must precede every sales presentation. Try Reference: 12.3.2.4 in the License Exam. The growth portion is taxed as a capital gain. A variable annuity's separate account is: 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. *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) I and IV. C) The portion of the premium invested in the insurance company's general account is used to provide for the minimum guaranteed amount of the death benefit. Variable Annuity Features | Annuity Guys The value of the annuity units is fixed. B) II and IV. *The owner of a life annuity with 10-year period certain will receive payments for life, subject to a minimum of 10 years. D) Variable annuities. Portfolio Compliance Risk Analyst Job in Newark, NJ at Prudential Question #29 of 48Question ID: 606831 A) Age 56, available cash to invest, makes the maximum retirement plan contributions to an existing IRA and 401(k) plan 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. All of the following characteristics are shared by both a mutual fund and a variable annuity's separate account EXCEPT: Which 2 of the 4 client profiles would a VA be LEAST suitable for? C) each annuity unit's value and the number of annuity units vary with time. 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. In a variable annuity contract, the provision that guarantees the annuitant payments for life is called the: Investopedia requires writers to use primary sources to support their work. A) variable annuities offer the investor protection against capital loss. Home; About. D) a variable annuity contract is subject to fluctuating values due to market fluctuations of the underlying separate accounts. Since , has paid out quarterly dividends ranging from $0.00 to $0.00 per share. A)an accounting measure used to determine the contract owner's interest in the separate account. Reference: 12.1.2 in the License Exam, Question #23 of 48Question ID: 901858 a variable annuity has which of the following characteristics C) II and IV A) It will be higher. Reasonable accommodations may be made to enable individuals with disabilities to perform the essential functions. "Variable Annuities: What You Should Know," Page 10. 11.1: Fundamentals of Annuities - Mathematics LibreTexts can be sold by someone with only an insurance license A registered representative explaining variable annuities to a customer would be CORRECT in stating that: A universal variable life policy should be purchased primarily for its insurance features, not its investment features. Flashcards - Securities and Tax - FreezingBlue Financial Sales Professional Job in Fort Worth, TX at New York Life C)the yield is always higher than bond yields. A) waiver of premium B)Value of each annuity unit each month. Get the free Learn About Annuities and Their Myths - F&G The correct answer was: partially a tax-free return of capital and partially taxable. Reference: 12.1.2 in the License Exam.