The number of annuity units rises once annuitization begins. C)Growth mutual funds 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. used for the investment of funds paid by contract holders. B)reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. If at all you go deeper, then you will find a wide range of annuity products from a variety of companies. 's dividend yield was % last year. Once the contract is annuitized, monthly payments to the customer are: D) expense guarantee. For a retired person, which of the following investments would provide the greatest protection against inflation? Among annuities, variable annuities differ from fixed annuities, which provide a specific and guaranteed return. During the payout period, payments are based on a fixed number of annuity units established when the contract was annuitized. C) During the annuity period. A) a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero Try the agent must be licensed in both insurance and securities. D) I and III. C)III and IV C) II and III. D) I and IV. An important basic characteristic of common stocks that makes them a suitable type of investment for the separate account of variable annuities is: A) 2800. Of the answer choices given the best would be to reevaluate the recommendation based on the new information tendered by the client. What is her total tax liability? *Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. A) changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. These include white papers, government data, original reporting, and interviews with industry experts. B) II and III. Premiums made into the annuity purchase accumulation units. The money paid in will be returned tax free, but the earnings portion will be taxed as ordinary income. The paper publication will not be rereleased. If your customer invests in a variable annuity and chooses to annuitize at age 65, which of the following statements are TRUE? Reference: 12.1.4 in the License Exam. Transcribed image text: 6. IV. C)III and IV. A trend makes considerable influence or impact. e) Are From the United States and Log on every day independently? She may choose to receive monthly payments for the rest of her life. All of the following statements regarding variable annuities are true EXCEPT: Which Earns More: Variable or Fixed Annuities? C) such an annuity is designed to combat inflation risk. B) the number of annuity units is fixed, and their value remains fixed. When a variable annuity contract is annuitized, the number of annuity units is fixed. The beneficiary is taxed at ordinary income rates during the year the lump sum is received. a. it performs a single task b. it is self-contained and independent of other modules c. it is relatively short d. all of the above are chamcleristics of a program module 7. B) accumulation units. variable annuity without paying tax at the time of the transfer. *The customer, in the accumulation stage of the annuity, is holding accumulation units. His objective is monthly income that he can receive after he retires to supplement his small pension and social security benefits. B) I and IV. D) Any time before the accumulation period. do not have a separate account Each of the remaining statements are true. Annual depreciation on the machine is$12,000, and the tax rate of the company is 25%. None of the other investments listed here offer tax-deferred growth. 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? D)suitable due to the relative safety of the investment. *The return on a variable annuity is not guaranteed; it is determined by the underlying portfolio's value. Her agent recommended she choose a variable annuity as a safe haven for the funds. Guaranteed Lifetime Annuity: How They Work, When They Pay You, This is also generally true of retirement plans. The AG49-A Revisions All of the following statements about variable annuities are true EXCEPT: B) the safety of the principal invested. Chapter 4: Annuities Flashcards | Chegg.com B)FINRA. VAs, blue chip mutual fund portfolios, ETFs and ETNs are all tied to market performance in some way and have risk characteristics that would not align in terms of suitability for this client. D)the rate of return is determined by the underlying portfolio's value. In a variable life annuity with 10-year period certain, a contract holder receives: The number of annuity units varies. B) II and III Question #28 of 48Question ID: 606821 Only variable annuities have payout plans that provide the client income for life. Immediate life annuity with 10-year period certain. a life insurance holder dies sooner than expected. Securely download your document with other editable templates, any time, with PDFfiller. A) partially a tax-free return of capital and partially taxable. An annuity is an agreement for one person or organization to pay another a series of payments. 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)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. \text{Salaries:} && \text{Deductions:}\\ D) Growth mutual funds. C) Corporate bonds. Variable annuities should be considered long-term investments due to the limitations on withdrawals. Unit 12: Variable Annuities Flashcards | Chegg.com An accumulation unit in a variable annuity contract is: 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. If your customer invests in a variable annuity and chooses to annuitize at age 65, which of the following statements are TRUE? If the annuitant dies during the accumulation period, his/her beneficiary will receive the promised annuity payments. III. Over the following year, the stock fund has a 10% return, and the bond fund has a 5% return. 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. 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. Post navigation B) I and IV. Once the contract is annuitized, monthly payments to the customer are: When the contract is annuitized, the annuitant is credited with a fixed number of annuity units. A)the yield is always higher than mortgage yields. View full document. The holder of a variable annuity receives the largest monthly payments under which of the following payout options? A) I and IV. Reference: 12.3.3 in the License Exam. When a partial withdrawal is made from an annuity, the earnings are considered to be taken out first for tax purposes (or LIFO). Reference: 12.2.1 in the License Exam. This recommendation is: \hspace{7pt} b. January 444, to record the employers payroll taxes on the payroll to be paid on January 444. 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. The number of annuity units becomes fixed when the contract is annuitized; it is the value of each unit that fluctuates. The value of the separate account is now $30,000. *Contributions to a nonqualified annuity are made with the owner's after-tax dollars. A) It will be higher. Francisco R. - Financial Professional - Prudential Financial | LinkedIn The holder of a variable annuity receives the largest monthly payments under which of the following payout options? When may a variable annuity account be surrendered? The most suitable option and one considered effective for married couples is a single joint and last survivor contract. In March, the actual net return to the separate account was 8%. 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. This makes a total of $4,000 tax and penalty paid on the random withdrawal. They are more suitable for individuals who can fund the annuity with cash, want to supplement existing retirement benefits they have already funded, are comfortable with the market risk associated with a VA separate account portfolio and anticipate a long retirement. When the annuitization option is selected, each payment represents both capital and earnings. This chapter was updated on 15 December, 2005. A) mortality guarantee. D)I and III. B)IRAs. Your client owns a variable annuity contract with an AIR of 4%. D)value of accumulation units. A)III and IV. Surrender fees and penalties for early withdrawal. A) two people are covered and payments continue until the second death. C) 10 years of variable payments. *Universal variable life policies are insurance company products that should be purchased primarily for the insurance features they offer rather than as an investment. As of March 03, 2023, had a relative dividend yield of % compared to the industry median of %. A variable annuity's separate account is: A separate account will invest in a number of different securities. D) II and IV. The entire amount is taxed as ordinary income. Needs - are goal-directed forces that people experience. 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 SEC. The earnings are taxable but the cost basis is returned tax free. Distributions to the annuitant will fluctuate during the payout period. B)mutual fund units. PGIM Fixed Income has over $900 billion in assets under management across a broad array of fixed . It's somewhat similar to a variable life insurance policy in that: You can choose how the product's value is invested. A) a minimum rate of return is guaranteed. D)A 10% penalty plus the payment of ordinary income tax on funds withdrawn in excess of the owner's basis. 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 D)money market funds. Salaries:SalessalariesWarehousesalariesOfficesalaries$670,000110,000234,000$1,014,000Deductions:IncometaxwithheldSocialsecuritytaxwithheldMedicaretaxwithheldU.S. A) complete all paper work to purchase the annuity contract and obtain the clients signature immediately. If a customer is about to buy a variable annuity contract and wants to select an annuity with a payout option providing the largest possible monthly payment, which of the following payout options would be most suitable? D) the payout plans provide the client income for life. The remainder of the premium is invested in the separate account. While a variable annuity has the benefit of tax-deferred growth, its annual expenses are likely to be much higher than the expenses of a typical mutual fund. 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. 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. IBM Noida, Uttar Pradesh, India1 month agoBe among the first 25 applicantsSee who IBM has hired for this roleNo longer accepting applications. D)I and III. Reference: 12.1.2.1.1. in the License Exam. A)accumulation shares. Reference: 12.1.2 in the License Exam. 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. 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 PDF The NIST definition of cloud computing It may be used by nongovernmental . The company's well-known Rock symbol is an icon of strength, stability, expertise and innovation that has stood the test of time. Question #32 of 48Question ID: 606815 IBM is a global brand and has its presence in 170 countries and operates . Accumulation Period of Fixed Annuities During this period, premiums are credited with interest which accumulates on a yearly basis. IBM hiring Senior Practitioner- Policy Admin in Noida, Uttar Pradesh Distribution of dividends occurs during the accumulation period. A) periodic payment immediate annuity. C) I and III. C)Mortality risk. A) variable annuities offer the investor protection against capital loss. The fees on variable annuities can be quite hefty. covers more than one person. A) taxed at a reduced rate. Variable annuity salespeople must register with all of the following EXCEPT: He originally invested $29,000 4 years ago; it now has a value of $39,000. A) A variable annuity An example would be if a life annuity with 10-year period certain contract holder died after 5 years, payments would continue for 5 more years to the beneficiary and then stop. D)II and III. In this case, the investor is taking a lump-sum distribution before reaching age 59- and must pay an additional 10% penalty on the taxable amount. A)the state banking commission. A 3 The wage for applicants for this position is $45,979.00 per year. A. Policyholders . Practice all cards. Withdrawals from a nonqualified variable annuity are made on a LIFO basis, so the taxable earnings are considered taken out before principal. A)Fixed annuities. a variable annuity does not guarantee payments for life. B) the client may vote for the board of directors or board of managers. \hspace{10pt} Federal unemployment (employer only), 0.8%0.8\%0.8%. It is innate and universal. *A joint life with last survivor contract covers multiple annuitants and ceases payments at the death of the last surviving annuitant. As part of the registration requirements, a prospectus must be filed and distributed to prospective investors. During the accumulation phase, the number of accumulation units will increase as additional money is invested. Universal variable life policies 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? national origin, genetics, disability, age, veteran status, or any other characteristic protected by law. A universal variable life policy should be purchased primarily for its insurance features, not its investment features. C) Age 40, currently unemployed B)I and III. Fixed annuities typically earn at a lower, stable rate. *Fixed income instruments, like bonds and fixed annuities, are subject to purchasing power risk. Reference: 12.2.1 in the License Exam. A 32-year-old with a company-sponsored 401k plan who will need a lump sum soon to finance graduate school tuition The correct answer was: partially a tax-free return of capital and partially taxable. B) life income A prospectus for a variable annuity contract: && \hspace{10pt}\text{Group insurance} & \underline{45,630}\\ Do homework Doing homework can help you learn and understand the material covered in class. Since , has paid out quarterly dividends ranging from $0.00 to $0.00 per share. *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. An investor who has purchased a nonqualified variable annuity has the right to: 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: D) variable annuities may only be sold by registered representatives. This factor is used to establish the dollar amount of the first annuity payment. Distribution can take place before or during any solicitation for sale. *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. What Are the Distribution Options for an Inherited Annuity? How to Navigate Market Volatility While Saving for Retirement, Variable Annuity: Definition and How It Works, Vs. If the contract holder dies before the period expires, the remaining payments are made to the beneficiary. Question #41 of 48Question ID: 606801 *A periodic payment immediate annuity is a contradiction in terms. a variable annuity guarantees an earnings rate of return. must precede every sales presentation. A)not suitable Simple and general annuities problems with solutions c. The separate account provides for a guaranteed minimum return. D) II and III. Reference: 12.1.2 in the License Exam. Fixed income instruments, like bonds and fixed annuities, are subject to purchasing power risk. 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.