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. 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 B)4200. Which of the following is characteristic of variable annuities? **Because common stocks are not fixed dollar investments, they have the opportunity to keep pace with inflation. Chapter 7: Annuities Flashcards | Quizlet For this potential advantage, the investor, rather than the insurance company, assumes the investment risk. 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. The growth portion is taxed as a capital gain. The paper publication will not be rereleased. vote for the investment adviser. B) 0. B)mutual fund units. Reference: 12.1.2.1.1. in the License Exam. C) payments continue for a pre-determined period of time. can be sold by someone with only an insurance license (primary needs). B) Exchange traded Funds (ETFs) or Exchange traded Notes (ETNs) You purchase a variable annuity contract by making either a single purchase payment or a series of purchase payments. A Variable Annuity has which of the following characteristics? D)A variable annuity, Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. B) allow customers to opt out of sharing of financial information with certain nonaffiliated firms. Are There Penalties for Withdrawing Money From Annuities? A trend is formed from non-repetitive actions of people. 8 annuities provide a guaranteed rate of return, whereas annuities provide conservative to aggressive investments whose rates of return are not guaranteed. Reference: 12.1.2.1.1 in the License Exam. Distribution can take place before or during any solicitation for sale. C) The insurance company. A customer has contributed $1,000 a year for 10 years to his tax-deferred nonqualified variable annuity. D) Capital gains tax on earnings exceeding basis. \hspace{7pt} b. January 444, to record the employers payroll taxes on the payroll to be paid on January 444. None of the other investments listed here offer tax-deferred growth. 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. Job Classification: Corporate - Legal and Compliance. 6102..55.001) is being updated on an ongoing basis. Distributions from such an annuity are computed on a LIFO basis with the income taxed first. A)II and IV. Though its stated return might not be as high as the other choices potential returns, only a fixed annuity fits the objective and risk averse traits of this client. All of the following statements concerning a variable annuity are correct EXCEPT: The value of accumulation and annuity units varies with the investment performance of the separate account. If the customer takes a withdrawal of $10,000, what are the tax consequences? In March, the actual net return to the separate account was 8%. Given that all of the current retirement investments are subject to market risk, the customer wants these new funds to have no market risk exposure. Try A) I and III. A trend makes considerable influence or impact. C)I and IV. The most popular type of variable annuity is a deferred annuity. Nicks Enterprises has purchased a new machine tool that will allow the company to improve the efficiency of its operations. Reference: 12.3.3 in the License Exam. *A variable annuity does not guarantee an earnings rate because earnings will depend on the performance of the separate account. D) payments continue until age 70-. D)Any tax due is deferred. However, because the client is not yet age 59- when making the withdrawal, he also pays a 10% penalty, or $1,000. Variable Annuity Features | Annuity Guys C) III and IV. D) an accounting measure used to determine the contract owner's interest in the separate account. The tax on this is $2,800 ($10,000 x 28%). D) value of accumulation units. I. Reference: 12.2.1 in the License Exam. An 18-year-old, unmarried high school student sought a safe investment for a $30,000 bequest until after she graduated from college. Similarly, CDs are insured, thereby eliminating risk and guaranteeing a return. Prudential's businesses offer a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds, asset management, and real estate services. The number of variable annuity accumulation units can rise during the accumulation period when additional units are being purchased. *A variable annuity may only be surrendered during the accumulation period. 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. If a 42-year-old customer has been depositing money in a variable annuity for 5 years, and he plans to stop investing but has no intention of withdrawing any funds for at least 20 years, he is holding: *Contributions to a nonqualified variable annuity are not tax deductible. Question #40 of 48Question ID: 606800 B) 10% penalty plus payment of ordinary income tax on all funds withdrawn. Variable annuities are designed to combat inflation risk. 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. B) IPO. The number of annuity units rises once annuitization begins. vote on proposed changes in investment policy. Which is it? A) not suitable Instructions\textsf{\textcolor{#4257b2}{Instructions}}Instructions This customer has no spouse or dependents, which negates the value of the death benefit. *The investor has already paid tax on the contributions but the earnings have grown tax-deferred. In a variable life annuity with 10-year period certain, a contract holder receives: *An immediate annuity has no accumulation period. When the contract is annuitized, the annuitant is credited with a fixed number of annuity units. 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. Senior Customer Care Advocate Annuities ($22 per hour) in Warwick B)I and II When the annuitization option is selected, each payment represents both capital and earnings. *Only variable annuities have payout plans that provide the client income for life. 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. Single payment deferred annuity. U.S. Securities and Exchange Commission. Herpes Zoster has all of the following characteristics except: Group of answer choices. Question #22 of 48Question ID: 606803 Question #44 of 48Question ID: 606797 The earnings on dollars invested into a variable annuity accumulate tax deferred, which is why variable annuities are popular products for retirement accumulation. Designed to protect against inflation. \text{Salaries:} && \text{Deductions:}\\ II. A variable annuity has two phases: an accumulation phase and a payout (annuitization) phase. IBM is a global brand and has its presence in 170 countries and operates . Among annuities, variable annuities differ from fixed annuities, which provide a specific and guaranteed return. When the first party dies, the annuity payment is made to the survivor. *A periodic payment immediate annuity is a contradiction in terms. \hspace{10pt} Social security, 6%6\%6% on first $100,000\$100,000$100,000 of employee annual earnings Your customer, still working, informs you that she will be funding a variable annuity you have recommended from 2 sources: a refinancing of her primary home where she will be able to draw out equity that has built up since it was purchased 15 years ago, and cashing out another variable annuity that she recently purchased within the past 2 years without a lifetime income rider like the one you have recommended. He originally invested $29,000 4 years ago; it now has a value of $39,000. D) not suitable because a lifetime income rider is only for someone who is already retired. B)Universal variable life policy. D) Variable annuities. At the end of the year, your account has a value of $10,750 ($5,500 in the stock fund and $5,250 in the bond fund), minus fees and charges. In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. A variable annuity is a type of annuity contract in which the value can vary based on the performance of an u . A) Money market fund. Based on this information the RR should: B)suitable regardless of funding sources However, they are protected by state guaranty associations in the event that the insurance company providing the product goes out of business. 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. If an insurance holder dies sooner than expected, the insurance company will have to pay the death benefit sooner. The features of variable deferred annuities are many. For an insurance company, mortality risk turns out unfavorably if: B) The death benefit cannot ever be more than the guaranteed benefit. D)A 10% penalty plus the payment of ordinary income tax on funds withdrawn in excess of the owner's basis. An annuity is an agreement for one person or organization to pay another a series of payments. The investor has already paid tax on the contributions but the earnings have grown tax-deferred. D) The fact that periodic payments into the contract may increase or decrease. D)each annuity unit's value is fixed, but the number of annuity units varies with time. How Good of a Deal Is an Indexed Annuity? B)FINRA. Your client owns a variable annuity contract with an AIR of 4%. *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. PGIM Fixed Income has over $900 billion in assets under management across a broad array of fixed . The value of the annuity units is fixed. And, unlike a fixed annuity, variable annuities do not provide any guarantee that you will earn a return on your investment. A) mortality guarantee. A security is any investment for profit with management performed by a third party. *During the accumulation phase, the number of accumulation units will increase as additional money is invested. Transcribed image text: 6. Reference: 12.3.2.1 in the License Exam. Her intent was to use the funds for the down payment on a house after graduation. If an investor has purchased an immediate variable annuity, which of the following statements best describe the investment? C) Corporate bonds. A) The fact that the annuity payment may increase or decrease. B) the number of annuity units is fixed, and their value remains fixed. Variable Annuities. D) Any time before the accumulation period. *Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. How is the distribution taxed? D)It cannot be determined until the April return is calculated. Reference: 12.3.3 in the License Exam. A)IPO. 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. Question #29 of 48Question ID: 606831 Your 65-year-old client owns a nonqualified variable annuity. An investor owning which of the following variable annuity contracts would hold accumulation units? C)II and IV. For a retired person, which of the following investments would provide the greatest protection against inflation? It's somewhat similar to a variable life insurance policy in that: You can choose how the product's value is invested. Of the four client profiles below which might be the best suited for a variable annuity recommendation? All of the following are characteristics of variable annuity contracts B) The entire $10,000 is taxable as ordinary income. B)each annuity unit's value varies with time, but the number of annuity units is fixed. 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. *The owner of a life annuity with 10-year period certain will receive payments for life, subject to a minimum of 10 years. What are the characteristics of fixed annuities? - InsuranceQnA an annuitant dies sooner than expected. Do whatever you want with a Learn About Annuities and Their Myths - F&G: fill, sign, print and send online instantly. How Variable Life Insurance Works: Pros and Cons - ValuePenguin A) changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. D) the number of annuity units becomes fixed when the contract is annuitized. An 18-year-old, unmarried high school student sought a safe investment for a $30,000 bequest until after she graduated from college. LESSON 7: ANNUITIES - FIXED AND VARIABLE - course.uceusa.com Fixed Annuity, Retirement Annuities: Know the Pros and Cons. A)the number of annuity units becomes fixed when the contract is annuitized. Question #17 of 48Question ID: 606802 C)II and 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. If a 42-year-old customer has been depositing money in a variable annuity for 5 years, and he plans to stop investing but has no intention of withdrawing any funds for at least 20 years, he is holding: Annuities are similar to other forms of investing in that the owner invests money with the hope that it will gain in value, but annuities also come with higher fees than most mutual funds. Reference: 12.3.3 in the License Exam. Her agent recommended she choose a variable annuity as a safe haven for the funds. A) a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero Of the answer choices given the best would be to reevaluate the recommendation based on the new information tendered by the client. Reference: 12.1.4.1 in the License Exam. B)variable annuities are classified as insurance products. Who assumes the investment risk in a variable annuity contract? C) annuity units. Which of the following are defined as securities? A demonstrated ability to quickly learn and continuously develop functional knowledge and an understanding of company products as well as administrative, claims, underwriting and marketing functions. 7 - Annuities Flashcards | Quizlet Reference: 12.1.1 in the License Exam. A registered representative recommends a variable annuity with an income rider to a client. As part of the registration requirements, a prospectus must be filed and distributed to prospective investors. continues payments as long as one annuitant is alive. No Hibernation for Issuers of Index-Linked Variable Annuities and Index *As contributions are made with after-tax dollars, only the earnings generated are taxed on withdrawal. D) accumulation shares. D) I and IV. D) expense guarantee. There is no clear answer to this. They can be classified by: Nature of the underlying investment - fixed or variable 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. *The return on a variable annuity is not guaranteed; it is determined by the underlying portfolio's value. The growth portion is subject to a 10% penalty. B) the rate of return is determined by the underlying portfolio's value. D) reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. The number of annuity units is fixed at the time of annuitization. B) prime rate. In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. 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. C)Money market fund. The most suitable option and one considered effective for married couples is a single joint and last survivor contract. If the annuitant dies during the accumulation period, his/her beneficiary will receive the promised annuity payments. withdraw funds without any tax consequences. 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) the payout plans provide the client income for life. d. Each month the payment will increase, decrease, or remain the same as the previous month's payment . a variable annuity does not guarantee an earnings rate of return. D)money market funds. If you die before the payout phase, your beneficiaries may receive a. A)100% tax free. The downside was that the buyer was exposed to market risk, which could result in losses. B)changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. The accumulation unit's value is used to calculate the total value of the account. C) Mutual fund portfolio consisting of blue chip stocks C)Mortality risk. 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. This makes a total of $4,000 tax and penalty paid on the random withdrawal. the state insurance commission. Reference: 12.3.4 in the License Exam. As part of the registration requirements, a prospectus must be filed and distributed to prospective investors. A Variable Annuity Has Which of the Following Characteristics Needs - are goal-directed forces that people experience. The entire amount is taxed as ordinary income. How to Rollover a Variable Annuity Into an IRA. D) Joint and last survivor annuity. Reference: 12.1.4.1 in the License Exam. Fixed annuities, on the other hand, provide a guaranteed return. What Are the Distribution Options for an Inherited Annuity? If an investor has a fixed-annuity contract with an insurance company, which of the following risks is assumed by the investor? A) changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. A)accumulation shares. Question #33 of 48Question ID: 606832 CH 7 Annuities Flashcards | Quizlet *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. C) III and IV. What percentile is represented by $710? An investor who purchases a fixed annuity contract assumes purchasing-power risk. A)contact the issuer of the clients existing VA contract to facilitate the clients surrender of the contract. A) two people are covered and payments continue until the second death. D) a variable annuity contract is subject to fluctuating values due to market fluctuations of the underlying separate accounts. Contributions to a nonqualified annuity are made with the owner's after-tax dollars. D) III and IV. Reference: 12.1.4 in the License Exam. Fixed annuities are not considered securities as return is guaranteed by the insurance company issuer. 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.