D) each annuity unit's value varies with time, but the number of annuity units is fixed. This cloud model is composed of five essential characteristics, three service models, and four deployment models. Question #24 of 48Question ID: 606806 The accumulation unit's value is used to calculate the total value of the account. B) II and III 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. A) two people are covered and payments continue until the second death. He makes the following four statements, all of which are true EXCEPT A) variable annuities offer the investor protection against capital loss. Over the following year, the stock fund has a 10% return, and the bond fund has a 5% return. Because common stocks are not fixed dollar investments, they have the opportunity to keep pace with inflation. How is the distribution taxed? A) The fact that the annuity payment may increase or decrease. D) II and III. Reference: 12.3.3 in the License Exam. The money paid in will be returned tax free, but the earnings portion will be taxed as ordinary income. In a variable annuity contract, the provision that guarantees the annuitant payments for life is called the: 6102.0.55.001 - Labour Statistics: Concepts, Sources and Methods, Dec 2005 D) variable annuities may only be sold by registered representatives. A single lump-sum investment is made, and payments begin immediately, since the investor has purchased annuity units. Chapter 6-Classification Annuities Flashcards | Quizlet \hspace{10pt} Federal unemployment (employer only), 0.8%0.8\%0.8%. A) Capital gains taxation on the earnings withdrawn in excess of the owner's basis. 10.1 This chapter addresses a number of ABS statistics relating to the economically active population which were not discussed elsewhere. In addition, an element of risk must be present. If in the following year, the S&P 500 declined by 5%, the annuities value would remain at $107,000 because gains are locked in each year. Fixed Annuity: A fixed annuity is a type of annuity contract that allows for the accumulation of capital on a tax-deferred basis. is required by the Securities Act of 1933. Variable annuities offer the possibility of higher returns and greater income than fixed annuities, but theres also a risk that the account will fall in value. D) I and III A)contact the issuer of the clients existing VA contract to facilitate the clients surrender of the contract. II. 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. A 45-year-old investor takes a lump-sum distribution from a nonqualified variable annuity. A customer has an investment objective of keeping pace with inflation while assuming moderate risk. A) Joint tenants annuity. The downside was that the buyer was exposed to market risk, which could result in losses. C) taxed as ordinary income only to the extent of earnings. D) Life annuity with 10-year period certain. 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. The minimum guaranteed death benefit is provided by that portion of the payment invested in the insurance company's general account. Ideally they should be funded with readily available cash rather than using funds liquidated from existing investments. B) The proceeds minus John's cost basis taxed as ordinary income at Sue's tax rate. 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. Determine the revenue equation given the profit and expense equations. B)each annuity unit's value varies with time, but the number of annuity units is fixed. You have 4 clients each expressing interest in a variable annuity contract. the agent must be licensed in both insurance and securities. Life Insurance vs. Annuity: What's the Difference? A variable annuity is a tax-deferred retirement vehicle that allows you to choose from a selection of investments and then pays you a level of income in retirement that is determined by the performance of the investments you choose. Reference: 12.1.2 in the License Exam. Variable annuities are designed to combat inflation risk. A) Age 56, available cash to invest, makes the maximum retirement plan contributions to an existing IRA and 401(k) plan Expert Answer. All of the following investment strategies offer either fully or partially tax-deductible contributions to individuals who meet eligibility requirements EXCEPT: Question #26 of 48Question ID: 606811 A) an accounting measure used to determine payments to the owner of the variable annuity. Early withdrawal is either removal of funds from a fixed-term investment before the maturity date, or the removal of funds from a tax-deferred investment account or retirement savings account before a prescribed time. Distribution can take place before or during any solicitation for sale. B)a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero Consequently, the client pays taxes only on the growth portion of the withdrawal ($10,000). A client has purchased a nonqualified variable annuity from a commercial insurance company. D)It cannot be determined until the April return is calculated. D)the rate of return is determined by the underlying portfolio's value. With variable annuities policyholders can choose from a number of investment opportunities. A passion for serving customers and a personal commitment to following through in a dynamic, fast-paced environment. Immediate life annuity with 10-year period certain. D) I and III. Reference: 12.3.2.1 in the License Exam. About Us The amount of the purchase payments that go into the account may be less than you paid because fees were taken out of the purchase payments. The number of annuity units varies. During the payout period, payments are based on a fixed number of annuity units established when the contract was annuitized. C)complete all paper work to purchase the annuity contract and obtain the clients signature immediately. C) none of these. A prospectus for a variable annuity contract: A) the investment portfolio is managed professionally. A) II and IV. B)I and IV. Question #42 of 48Question ID: 606830 Because the client is older than age 59-, he does not pay 10% premature distribution penalty tax. An annuity factor is taken from the annuity table, which considers, for example, the investor's sex and age. regulated under both securities and insurance laws. The investor has already paid tax on the contributions but the earnings have grown tax-deferred. Determine whether the following events are independent or dependent. Anthony Battle is a CERTIFIED FINANCIAL PLANNER professional. Reference: 12.1.2 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). Variable Annuities Flashcards | Quizlet B)II and III. D) the yield is always higher than mortgage yields. A trend makes considerable influence or impact. What percentile is represented by $710? When the contract is annuitized, the annuitant is credited with a fixed number of annuity units. Solved The following are characteristics of a public | Chegg.com B)Life annuity with period certain. Immediate annuities purchase annuity units directly. A)II and III *VAs are less suitable for individuals who have not yet made maximum contributions to other retirement accounts such as IRAs and 401ks. Explain what is meant by positive and negative b. Get the free Learn About Annuities and Their Myths - F&G If an investor has purchased an immediate variable annuity, which of the following statements best describe the investment? 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. D) 4500. Question #12 of 48Question ID: 606814 *Universal variable life policies are insurance company products that should be purchased primarily for the insurance features they offer rather than as an investment. Full-Time. Based only on these facts, the variable annuity recommendation is A)IPO. C) II and III. Which of the following statements regarding variable annuities are TRUE? Reference: 12.3.3 in the License Exam. 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 B)a majority vote from the shareholders is required to change the investment objectives. A) I and II Once a variable annuity has been annuitized: Of the 4 client profiles below, which might be the best suited for a variable annuity recommendation? A variable annuity does not guarantee an earnings rate because earnings will depend on the performance of the separate account. Reference: 12.1.2 in the License Exam, Question #21 of 48Question ID: 606812 C)Corporate bonds. Once a variable annuity has been annuitized: A)Fixed annuity contract with a discussion regarding purchasing power risk D) II and IV. D)I and III. D)I and III. *Fixed income instruments, like bonds and fixed annuities, are subject to purchasing power risk. B)100% taxable. B) 10% penalty plus payment of ordinary income tax on all funds withdrawn. A) II and III. She will receive the annuity's entire value in a lump-sum payment. C)earnings only and taxable must precede every sales presentation. In March, the actual net return to the separate account was 8%. 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? Describe. A) Life-only annuity Reference: 12.1.4 in the License Exam. D) Keogh plans. continues payments only as long as all annuitants are still alive. B) The entire $10,000 is taxable as ordinary income. On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity). C)Money market fund. Which of the following is not characteristic of a fixed annuity? Dividing the funds available so as to fund 2 separate contracts, whether they be joint with last survivor or life income, would not be cost efficient for spouses. D)the safety of the principal invested. A) be paid to a designated beneficiary. Among annuities, variable annuities differ from fixed annuities, which provide a specific and guaranteed return. What are the characteristics of fixed annuities? - InsuranceQnA (The exception is the fixed income annuity, which has a moderate to high payout that rises as the annuitant ages). Life with period certain will produce a smaller check for life because the insurance company will guarantee payments to a beneficiary for a certain period of time designated in the contract should the annuitant die within that period. Annuities due are a type of annuity where payments are made at the beginning of each payment period. D) payments continue until age 70-. C)suitable due to the death benefit features of a variable annuity. B) the number of annuity units is fixed, and their value remains fixed. A life with period certain contract guarantees payments for a specified number of years to a named beneficiary if the annuitant dies during that time. The annuity unit's value represents a guaranteed return. B) II and IV. What will this transaction provide? 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. Your 65-year-old client owns a nonqualified variable annuity. Investopedia does not include all offers available in the marketplace. 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. D) There is no guarantee regarding the investment results of the separate account. Funding a VA contract by cashing out either life insurance policies or existing VA contracts, especially those held for a short period of time is not suitable. During the accumulation phase, the number of accumulation units will increase as additional money is invested. B)Universal variable life policy. A 1 The applicant and possibly the agent initial any changes made. \hspace{7pt} b. January 444, to record the employers payroll taxes on the payroll to be paid on January 444. Based on this information the RR should: Income that cannot be outlived by the owner The number of accumulation units can rise during the accumulation period. It may be used by nongovernmental . Once annuitized, the number of annuity units does not vary. 222. C) 10% penalty plus payment of ordinary income tax on all funds withdrawn exceeding basis. Question #38 of 48Question ID: 606798 This recommendation is: D) III and IV. This annuity is nonqualified, which means the client has paid for it with after-tax dollars and has a basis equal to the original $29,000 investment. What is the taxable consequence of this withdrawal to your client? If your customer invests in a variable annuity and chooses to annuitize at age 65, which of the following statements are TRUE? B) IPO. The number of annuity units becomes fixed when the contract is annuitized; it is the value of each unit that fluctuates. In the case of deferred annuities, this is often referred to as the accumulation phase. As part of his profile he stresses that he has had uncomfortable experiences in the past with the stock market and is not inclined to invest in anything that is based on stock market performance and would opt for principal protection instead. B)I and II The separate account is NOT likely to invest in: An important basic characteristic of common stocks that makes them a suitable type of investment for the separate account of variable annuities is: Therefore only a fixed annuity could be considered as suitable. Question #19 of 48Question ID: 606826 D) Growth mutual funds. *A periodic payment immediate annuity is a contradiction in terms. Question #35 of 48Question ID: 606810 A)an accounting measure used to determine the contract owner's interest in the separate account. Once the cost basis is reached, any further withdrawals are a nontaxable return of principal. U.S. Securities and Exchange Commission. The paper publication will not be rereleased. Which of the following recommendations would best meet the customer profile? 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. However, a discussion should occur regarding the risks that are associated with a fixed annuity; purchasing power risk. **Because common stocks are not fixed dollar investments, they have the opportunity to keep pace with inflation. *The owner of a life annuity with 10-year period certain will receive payments for life, subject to a minimum of 10 years. IV. Variable Annuity: Definition and How It Works, Vs. Fixed Annuity Reference: 12.1.2.1.1. in the License Exam. D)I and IV. III) A hierarchy of corporate staff evaluates divisions' plans and performance. Chapter 12: Variable Annuities Flashcards | Quizlet D)II and III. There is a guaranteed minimum interest rate, normally amounting to between 1 and 3 percent. A) mortality guarantee. A) The fact that the annuity payment may increase or decrease. The remainder of the premium is invested in the separate account. A) Ordinary income tax on earnings exceeding basis. B) Municipal bonds. The work environment characteristics are normal office conditions. \hspace{10pt} \text{Sales salaries} & \$\hspace{5pt} 670,000 & \hspace{10pt} \text{Income tax withheld} & \$198,744\\ Round to the nearest hundredth of a percentile. B)Variable annuities. D)Municipal bonds. A) Money market fund. No paper. B) It will be lower. What is the taxable consequence of this withdrawal to your client? D) Any time before the accumulation period. The trial of the assassins commenced on the following day; and the evidence being so clear, they were both found guilty, and condemned, to be broken alive on the wheel. However, at the end of the period certain the payments to the named beneficiary (the spouse) will stop. The value of the customer's account is converted into annuity units if and when the customer decides to annuitize the contract. Fixed annuities pay a fixed monthly benefit which loses purchasing power if there is inflation. C) insurance companies keep variable annuity funds in separate accounts from other insurance products. *When money is deposited into the annuity, it is purchasing accumulation units. Reference: 12.3.1 in the License Exam, Question #30 of 48Question ID: 606833 C)II and IV. All of the following are characteristics of variable annuity contracts However, because the client is not yet age 59- when making the withdrawal, he also pays a 10% penalty, or $1,000. C) number of accumulation units. B)cost of living. A) partially a tax-free return of capital and partially taxable. With a fixed annuity, by contrast, the insurance company assumes the risk of delivering whatever return it has promised. an annuitant dies sooner than expected. *A variable annuity may only be surrendered during the accumulation period. An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are Get Started. D) the payout plans provide the client income for life. \hspace{10pt} Medicare, 1.5%1.5\%1.5% Variable annuities must be registered with: What are the characteristics of annuity? - Wise-Answers A) waiver of premium B) single payment deferred annuity. 7 - Annuities Flashcards | Quizlet The value of accumulation and annuity units varies with the investment performance of the separate account. must be filed with FINRA. *The number of variable annuity accumulation units can rise during the accumulation period when additional units are being purchased. Surrender fees and penalties for early withdrawal. *With guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is not guaranteed because payments stop when the annuitant has received an amount equal to the principal account value or the contract term ends. Which of the following are defined as securities? When the first party dies, the annuity payment is made to the survivor. A customer, who has contributed to an IRA and to an employer matching 401(k) plan continuously for many years, wants to purchase an annuity contract to add additional monthly income once retired. U.S. Securities and Exchange Commission. MetLife, Inc. Senior Customer Care Advocate Annuities ($22 per hour Variable Annuities | Investor.gov C) Life annuity with period certain. 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 . C) such an annuity is designed to combat inflation risk. *Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. A)unsuitable because the return on something as conservative as a variable annuity tends to be low. D) Variable annuity. C) Corporate bonds. A) waiver of premium Since the client is older than 59 at the time of distribution, the additional 10% penalty tax is not incurred. Refinancing a home to draw out equity has been identified by FINRA as an abusive sales tactic regarding the sales of VAs. The beneficiary is taxed at ordinary income rates during the year the lump sum is received. D)II and IV. && \hspace{10pt}\text{Group insurance} & \underline{45,630}\\ The separate account performance compared to an assumed interest rate. He makes several statements regarding the contract. The number of variable annuity accumulation units can rise during the accumulation period when additional units are being purchased. C) II and III. There is no clear answer to this. *Contributions to a nonqualified variable annuity are not tax deductible. A client has purchased a nonqualified variable annuity from a commercial insurance company. The number of annuity units is fixed at the time of annuitization. What is her total tax liability? C. A) I and III. All of the following are true about annuities EXCEPT: they have all the same characteristics as life insurance. Based on the information given in the question, the VA recommendation would not be suitable. When a partial withdrawal is made from an annuity, the earnings are considered to be taken out first for tax purposes (or LIFO). the state insurance commission. C) the client assumes the investment risk. C) II and IV Therefore, ordinary income taxes will apply to the entire $10,000. Variable annuities involve underlying equity investments in a separate account. C) be returned to the separate account. no. An Immediate Annuity is designed to provide each of the following features, EXCEPT: The creation of an estate. C)The entire $10,000 is taxable as ordinary income. Therefore, ordinary income taxes will apply to the entire $10,000. As of March 03, 2023, had a relative dividend yield of % compared to the industry median of %. In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. D)with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed, With guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is not guaranteed because payments stop when the annuitant has received an amount equal to the principal account value or the contract term ends. Senior Customer Care Advocate Annuities ($22 per hour) in Warwick vote for the investment adviser. For an investor, which of the following is the most important factor in determining the suitability of a variable annuity investment? Based only on these facts, the variable annuity recommendation is