The number of annuity units rises once annuitization begins. A) III and IV. As part of the registration requirements, a prospectus must be filed and distributed to prospective investors. These contracts come with high surrender charges. An individual who purchases a Life annuity is given protection against: the risk of living longer than expected The type of annuity that can be purchased with one monetary deposit is called a (n) Immediate annuity N purchases an annuity by making payments in an amount no less than $100 quarterly. Assuming that the payroll for the last week of the year is to be paid on December 313131, journalize the following entries: D) Joint and last survivor annuity. vote for the investment adviser. *A variable annuity may only be surrendered during the accumulation period. A registered representative recommends a variable annuity with an income rider to a client. III. "Variable Annuities: What You Should Know," Pages 67. Your 65-year-old client owns a nonqualified variable annuity. D) Keogh plans. a) What percentage of Facebook's users are from the United States? D)suitable due to the relative safety of the investment. *A variable annuity does not guarantee an earnings rate because earnings will depend on the performance of the separate account. As the name implies, the investment performance of a variable annuity's portfolio (separate account) can vary, and the investor bears the risk of any potential decline in its value. B) I and III. 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. B) Age 78, retired for 20 years, lives comfortably and wants to leave all liquid assets to children A) the investment portfolio is managed professionally. A)accumulation shares. Question #22 of 48Question ID: 606803 e) Are From the United States and Log on every day independently? C) There is no tax as the withdrawal is considered return of capital. Question #40 of 48Question ID: 606800 is required by the Securities Act of 1933. B)Life annuity with period certain. 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. a variable annuity does not guarantee an earnings rate of return. Variable annuities are designed to combat inflation risk. Therefore, variable annuities must be registered with the state insurance commission and the Securities and Exchange Commission. Post navigation used to escrow late or otherwise delinquent premium payments. C) 100% tax free. Variable Annuity Advantages and Disadvantages, Guide to Annuities: What They Are, Types, and How They Work. $63,000 b.$51,000 c. $18,000 d.$6,000. A universal variable life policy should be purchased primarily for its insurance features, not its investment features. Practice all cards. An individual retirement annuity is an investment vehiclesimilar to an individual retirement accountthat is offered by insurance companies. The entire amount is taxed as ordinary income. An annuity factor is taken from the annuity table, which considers, for example, the investor's sex and age. 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. Reasonable accommodations may be made to enable individuals with disabilities to perform the essential functions. required to be located off of the company's premises. c. The separate account provides for a guaranteed minimum return. A)II and IV. The wage for applicants for this position is $45,979.00 per year. 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. Surrender fees and penalties for early withdrawal. A)the yield is always higher than mortgage yields. EEO IS THE LAW . None of the other investments listed here offer tax-deferred growth. D) II and III. The number of accumulation units is always fixed throughout the accumulation period. The amount taxed is the amount of the lump-sum payment minus the deceased's cost basis in the investment. Registration with FINRA is de facto registration with the SEC; no registration is required by the state banking commission. D) Two-thirds of the withdrawal is taxable as ordinary income. D) Life annuity with 10-year period certain. But again, the need to designate beneficiaries is not an issue for this annuitant. C) payments continue for a pre-determined period of time. What is her total tax liability? A)the state banking commission. C) IRAs. do not have a separate account Policyholders . The downside was that the buyer was exposed to market risk, which could result in losses. 8 annuities provide a guaranteed rate of return, whereas annuities provide conservative to aggressive investments whose rates of return are not guaranteed. the state insurance commission. B) taxed as ordinary income. Variable Annuities. Your client has a large sum of money to invest from the proceeds of the sale of his home. A) II and III. Once the cost basis is reached, any further withdrawals are a nontaxable return of principal. Question #27 of 48Question ID: 606818 *Contributions to a nonqualified annuity are made with the owner's after-tax dollars. Question #31 of 48Question ID: 606836 None of the other investments listed here offer tax-deferred growth. *Only variable annuities have payout plans that provide the client income for life. *Once a variable annuity is annuitized, the accumulation units are converted into a fixed number of annuity units. For a retired person, which of the following investments would provide the greatest protection against inflation? 6102..55.001) is being updated on an ongoing basis. If at all you go deeper, then you will find a wide range of annuity products from a variety of companies. 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 Reference: 12.1.4 in the License Exam. A registered representative's (RR) customer is speaking of a variable life insurance contract he owns. used for the investment of funds paid by contract holders. There is a guaranteed minimum interest rate, normally amounting to between 1 and 3 percent. What is the taxable consequence of this withdrawal to your client? B)I and III. 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. How Good of a Deal Is an Indexed Annuity? Reference: 12.1.2 in the License Exam, Question #23 of 48Question ID: 901858 D)money market funds. The upside was the possibility of higher returns during the accumulation phase and a larger income during the payout phase. Diagnosis is made by punch biopsy. When the annuitization option is selected, each payment represents both capital and earnings. If you die before the payout phase, your beneficiaries may receive a. Insurance companies introduced the variable annuity as an opportunity to keep pace with inflation. A) II and III. This would not align with the couple's criteria for coverage as long as they both live. U.S. Securities and Exchange Commission. Question #38 of 48Question ID: 606798 D) I and IV. D) a variable annuity contract is subject to fluctuating values due to market fluctuations of the underlying separate accounts. 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. Based on this information the RR should: B) the safety of the principal invested. D)A 10% penalty plus the payment of ordinary income tax on funds withdrawn in excess of the owner's basis. *Universal variable life policies are insurance company products that should be purchased primarily for the insurance features they offer rather than as an investment. Reference: 12.1.2 in the License Exam. A customer has a nonqualified variable annuity. No software installation. *Variable annuity contracts were devised to help investors keep pace with inflation. Which of the following recommendations would best meet the customer profile? An investor who purchases a fixed annuity contract assumes purchasing-power risk. Consequently, the client pays taxes only on the growth portion of the withdrawal ($10,000). When the annuitization option is selected, each payment represents both capital and earnings. During payout, distributions will fluctuate due to performance in the separate account. *An immediate annuity has no accumulation period. C)the SEC. Are Variable Annuities Subject to Required Minimum Distributions? C)Keogh plans. In addition, if the customer is not at least 59-, there will be a tax penalty of an additional 10%. D) payments continue until age 70-. C)number of accumulation units. B)a majority vote from the shareholders is required to change the investment objectives. There are two elements that contribute to the value of a variable annuity: the principal, which is the amount of money you pay into the annuity, and the returns that your annuitys underlying investments deliver on that principal over the course of time. The largest monthly check an annuitant can receive for the rest of his life is generated by a straight life (life income or life only) payout option. C) A 10% penalty plus the payment of ordinary income tax on all of the funds withdrawn. Reference: 12.2.1 in the License Exam. A) Joint tenants annuity. An investor owning which of the following variable annuity contracts would hold accumulation units? A prospectus for a variable annuity contract: A) mutual fund units. B) IPO. withdraw funds without any tax consequences. Before the contract is annuitized, your client, currently age 60, withdraws some funds for personal purposes. Only variable annuities have payout plans that provide the client income for life. B) 0. A) A 75 year old women, who is a former executive retired for over ten years who wants to preserve as much capital as she can to leave to her two grandchildren. A registered person recommends the purchase of a variable annuity to one of his clients. A) I and II All of the following are characteristics of a variable annuity, except: a. B) Municipal bonds. The investor has already paid tax on the contributions but the earnings have grown tax-deferred. The annuity unit's value represents a guaranteed return. A) periodic payment immediate annuity. Which of the following is NOT an accurate statement concerning a variable life insurance contract? PGIM Fixed Income has over $900 billion in assets under management across a broad array of fixed . The fees on variable annuities can be quite hefty. A variable annuity is both an insurance and a securities product. The following changes have been incorporated into Special Publication 800145, as of the date indicated - . Question #26 of 48Question ID: 606811 The noble relatives of the Count d'Horn absolutely blocked up the ante-chambers of the regent, praying for mercy on the misguided youth, and alleging that he was insane . B) The death benefit cannot ever be more than the guaranteed benefit. II) It has an internal capital market wherein each division competes for funds. The number of annuity units rises once annuitization begins. Your 65-year-old client owns a nonqualified variable annuity. D) the yield is always higher than mortgage yields. III. 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. A customer is receiving annuitized payments from a variable 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 All of the following statements about variable annuities are true EXCEPT: C)none of these. 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. B) 10% penalty plus payment of ordinary income tax on all funds withdrawn. must be filed with FINRA. Because common stocks are not fixed dollar investments, they have the opportunity to keep pace with inflation. D)suggest to the client that perhaps a loan or refinancing his vacation home might be a better way to fund the contract purchase. 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. This guideline has been prepared for use by Federal agencies. D) 4500. Generally, a life-only contract pays the most per month because payments cease at the annuitant's death. A) mortality guarantee. C) Life annuity with period certain. B) It will be lower. IBM is a global brand and has its presence in 170 countries and operates . D) I and IV. He makes the following four statements, all of which are true EXCEPT The earnings on dollars invested into a variable annuity accumulate tax deferred, which is why variable annuities are popular products for retirement accumulation. C)II and III. That can adversely affect your returns over the long term, compared with other types of investments. D) II and IV. Each of the remaining statements are true. *A variable annuity payout is determined by comparing account performance with AIR, and this month's payout with last month's payout. savingsbondsGroupinsurance$198,74451,71415,21030,42045,630$341,718, Tax rates assumed: C)annuity units. A) 2800. If the contract holder dies before the period expires, the remaining payments are made to the beneficiary. savingsbonds30,420Groupinsurance45,630$341,718\begin{array}{lrlr} A) a minimum rate of return is guaranteed. Question #15 of 48Question ID: 606804 They are also riddled with fees, which can cut into profits. C) with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed D) A 50 year old individual with $50,000 cash to invest who has already made the maximum contributions to an IRA and the 401(k) plan at his place of employment and would like to minimize some of the tax consequences of his currently high tax bracket. A) a minimum rate of return is guaranteed. *The minimum guaranteed death benefit is provided by that portion of the payment invested in the insurance company's general account. IV. 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. B) suitable if she has enough equity in the home to fund the variable annuity without cashing out the other VA contract Fixed Annuity, Retirement Annuities: Know the Pros and Cons. A) two people are covered and payments continue until the second death. C)III and IV D) Age 27, saving for first home. What Are the Risks of Annuities in a Recession? must precede every sales presentation. Reference: 12.2.1 in the License Exam, Question #48 of 48Question ID: 606835 A customer has contributed $1,000 a year for 10 years to his tax-deferred nonqualified variable annuity. Variable annuity Which of the following is characteristic of fixed annuities? 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 A 45-year-old employed individual with no other retirement accounts in place A) Fixed annuities. Most annuities will not allow you to withdraw additional funds from the account once the payout phase has begun. B)Two-thirds of the withdrawal is taxable as ordinary income. 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. a. can be sold by someone with only an insurance license Distributions to the annuitant will fluctuate during the payout period. B) Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. B)I and IV. An annuity payment is the dollar amount of the equal periodic payment in an annuity environment. The annuity unit's value represents a guaranteed return. Reference: 12.1.4.1 in the License Exam. Reference: 12.1.2.1.2 in the License Exam. Your 55-year-old client invested $50,000 four years ago in a nonqualified variable annuity. Reference: 12.3.1 in the License Exam. D) periodic payment deferred annuity. However, it does guarantee payments for life (mortality). (Check all that apply.) The anti-money laundering rules for insurance companies highlight that each insurance company - like other financial institutions subject to anti-money laundering program requirements - must develop a risk-based anti-money laundering program that identifies, assesses, and mitigates any risks of money laundering, terrorist financing, and other D) reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. Reference: 12.3.3 in the License Exam. 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. B) accumulation units. B) Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. 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 dissolution of the trust c. for distributing income and capital gains. Since the client is older than 59 at the time of distribution, the additional 10% penalty tax is not incurred. Variable annuities should be considered long-term investments due to the limitations on withdrawals. 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. 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. 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: The features of variable deferred annuities are many. In a variable life annuity with 10-year period certain, a contract holder receives: Inflation-hedging, using both tax deferral combined with market growth potential, is made possible by variable annuities #. Annuity units are units of ownership when the contract is in the payout stage. In deciding whether to put money into a variable annuity versus some other type of investment, its worth weighing these pros and cons. A)Purchasing power risk. When the contract is annuitized, the annuitant is credited with a fixed number of annuity units. The holder of a variable annuity receives the largest monthly payments under which of the following payout options? *Since this is a nonqualified annuity (with no tax deduction), the client pays taxes only on the growth portion or, in this case, $10,000. A)II and III Here is how guaranteed lifetime annuities work. Therefore, ordinary income taxes will apply to the entire $10,000. You have 4 clients each expressing interest in a variable annuity contract. A) The fact that the annuity payment may increase or decrease. An accumulation unit in a variable annuity contract is: Your customer in his early 30s has received a modest inheritance from a relative. Reference: 12.1.1 in the License Exam. Drives - are hardwired characteristics of the brain that correct deficiencies or maintain an internal equilibrium by producing emotions to energize individuals. externalities. Which of the following is characteristic of variable annuities? B) Corporate debt securities *The most important consideration in purchasing a variable annuity is to be aware that benefit payments will fluctuate with the investment performance of the separate account. A) number of annuity units. This factor is used to establish the dollar amount of the first annuity payment. D) reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. The payout compared to last month's payout. 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. Fixed annuities are not considered securities as return is guaranteed by the insurance company issuer. Universal variable life policies 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. A) taxed at a reduced rate. The value of the annuity units varies. *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. a life insurance holder lives longer than expected. A customer has an investment objective of keeping pace with inflation while assuming moderate risk. *During the payout period, payments are based on a fixed number of annuity units established when the contract was annuitized. "Variable Annuities: What You Should Know," Page 3. are purchased primarily for their insurance features What is the annual cash flow generated from the new machine? C) II and IV. The funds in an annuity are off-limits to creditors and other debt collectors. B) During the accumulation period. Distributions from nonqualified variable annuities are: Determine whether the following events are independent or dependent. The figure below illustrates a six-month annuity with monthly payments. D)the rate of return is determined by the underlying portfolio's value. The payout compared to the initial payout upon annuitization. 111. How Are Nonqualified Variable Annuities Taxed? d. Each month the payment will increase, decrease, or remain the same as the previous month's payment . Contributions to a nonqualified annuity are made with the owner's after-tax dollars. A)each annuity unit's value and the number of annuity units vary with time. He earned the Chartered Financial Consultant designation for advanced financial planning, the Chartered Life Underwriter designation for advanced insurance specialization, the Accredited Financial Counselor for Financial Counseling and both the Retirement Income Certified Professional, and Certified Retirement Counselor designations for advance retirement planning. A the safety of the principal invested B the yield is always higher than bond yields. B) II and IV. B) variable annuities are classified as insurance products. B) During the accumulation period. Reference: 12.2.1 in the License Exam. C)II and IV. a variable annuity guarantees an earnings rate of return. A) I and III. The beneficiary is taxed at ordinary income rates during the year the lump sum is received. A) mortality guarantee. Which of the following recommendations would best meet the customer profile? C)The entire $10,000 is taxable as ordinary income. 222. *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. Question #33 of 48Question ID: 606832 *Contributions to a nonqualified variable annuity are not tax deductible. A) I and II. Uses in Investing, Pros, and Cons, Indexed Annuity: Definition, How It Works, Yields, and Caps. Question #18 of 48Question ID: 606827 "Variable Annuities: What You Should Know," Page 10. The separate account is NOT likely to invest in: Classifying annuities There are many categories of annuities. Based on the clients profile which of the following would be the best recommendation? B) 0. 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. Lifetime vs. fixed period annuities B)corporate stock. the SEC. 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. \hspace{10pt} Federal unemployment (employer only), 0.8%0.8\%0.8%. *Under the mortality guarantee, the insurance company assumes mortality risk by guaranteeing payments for life, though the amount of each payment is not guaranteed. *Fixed income instruments, like bonds and fixed annuities, are subject to purchasing power risk. The accumulation unit's value is used to calculate the total value of the account. C)III and IV. *During the accumulation phase, the number of accumulation units will increase as additional money is invested. B) a variable annuity contract is not required to be sold by prospectus because it is an insurance contract D)separate account may consist of mutual funds. A) A variable annuity D) each annuity unit's value varies with time, but the number of annuity units is fixed. Prudential Retirement Security Annuity VI is a group variable annuity (GVA) issued by Prudential Retirement Insurance and Annuity Company (PRIAC) which utilizes a Separate Account offered Question #20 of 48Question ID: 606808 Clusters of vesicles in various stages. View full document. III. A) waiver of premium With regard to a variable annuity, all of the following may vary EXCEPT: 10.1 This chapter addresses a number of ABS statistics relating to the economically active population which were not discussed elsewhere. 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 B) I and II. A) Money market fund. Round to the nearest hundredth of a percentile. D) value of accumulation units. Which of the following statements regarding variable annuities are TRUE? 's dividend yield was % last year. *When money is deposited into the annuity, it is purchasing accumulation units. B) 100% taxable. D) A 10% penalty plus the payment of ordinary income tax on funds withdrawn in excess of the owner's basis. A) A variable annuity A) partially a tax-free return of capital and partially taxable. B)a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero C) III and IV. In addition, if the customer is not at least 59-, there will be a tax penalty of an additional 10%. The $30,000 contract value represents $10,000 of contributions and $20,000 of earnings. All of the following are accurate statements to make to the client EXCEPT An accumulation unit in a variable annuity contract is: A) Fixed Annuity When the first party dies, the annuity payment is made to the survivor. Variable annuity salespeople must register with all of the following EXCEPT: A) FINRA. C)suitable due to the death benefit features of a variable annuity. 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? How to Navigate Market Volatility While Saving for Retirement, Variable Annuity: Definition and How It Works, Vs. This customer has no spouse or dependents, which negates the value of the death benefit. The number of annuity units is fixed at the time of annuitization. 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. Question #37 of 48Question ID: 606817 Ideally they should be funded with readily available cash rather than using funds liquidated from existing investments. *The customer, in the accumulation stage of the annuity, is holding accumulation units. C) taxed as ordinary income only to the extent of earnings. &&& \underline{\underline{\$341,718}} B)II and III. *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. The correct answer was: partially a tax-free return of capital and partially taxable. A)number of annuity units. If the data is normally distributed with standard deviation$198, find the percent of vacationers who spent less than $1,200 per day. The LATF-adopted ILVA Actuarial Guideline has an effective date of July 1, 2024 for contracts, riders or endorsements issued on or after that date. \hspace{10pt} Medicare, 1.5%1.5\%1.5% On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity).
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