a variable annuity has which of the following characteristics

B) Municipal bonds. The money paid in will be returned tax free, but the earnings portion will be taxed as ordinary income. The accumulation unit's value is used to calculate the total value of the account. How Are Nonqualified Variable Annuities Taxed? When the first party dies, the annuity payment is made to the survivor. 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 guaranteed death benefit guarantees that the beneficiary will receive a death benefit if the annuitant dies before the annuity begins paying benefits. You can tailor the income stream to suit your needs. D)Joint and last survivor annuity. 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. C) II and III. Once the cost basis is reached, any further withdrawals are a nontaxable return of principal. B) II and III. When the annuitization option is selected, each payment represents both capital and earnings. 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 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. The time period depends on how often the income is to be paid. If at all you go deeper, then you will find a wide range of annuity products from a variety of companies. A 45-year-old employed individual with no other retirement accounts in place A)Fixed annuities. The value of the separate account is now $30,000. A variable annuity's separate account is: D) a minimum of 10 years of variable payments, followed by additional variable payments for life D) each annuity unit's value varies with time, but the number of annuity units is fixed. Final answer. Future annuity payments will vary according to the separate account's performance. *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. A)exempt from taxes D)money market funds. Reference: 12.1.4.1 in the License Exam. Reference: 12.3.4 in the License Exam. *Accumulation units represent units of ownership in a life insurance company's separate account when the contract is in the accumulation stage. 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 C) I and III. C) single payment immediate annuity. D) Keogh plans. A) The fact that the annuity payment may increase or decrease. No paper. B)It will be lower. D) minimum guaranteed death benefit. D) I and III. B)a minimum rate of return is guaranteed. Distributions to the annuitant will fluctuate during the payout period. Her intent was to use the funds for the down payment on a house after graduation. He originally invested $29,000 4 years ago; it now has a value of $39,000. IV. \hspace{10pt} State unemployment (employer only), 3.8%3.8\%3.8% II) It has an internal capital market wherein each division competes for funds. This compensation may impact how and where listings appear. The number of annuity units becomes fixed when the contract is annuitized; it is the value of each unit that fluctuates. Life income riders are best suited for those who anticipate a lengthy retirement and are generally not yet retired when making the VA purchase. 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 IV. A) partially a tax-free return of capital and partially taxable. A rider or statement of condition that allows a variable life insured to maintain policy coverage after becoming disabled is a benefit known as D) A 10% penalty plus the payment of ordinary income tax on funds withdrawn in excess of the owner's basis. Round to the nearest hundredth of a percentile. C)Keogh plans. Before the contract is annuitized, your client, currently age 60, withdraws some funds for personal purposes. B)fixed in value until the holder retires. B)Tax-free municipal bonds 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 An Immediate Annuity is designed to provide each of the following features, EXCEPT: The creation of an estate. (primary needs). b) What probability is the 20%20 \%20% mentioned above? D) be paid to the issuing company to complete the plan. FINRA. A variable annuity's separate account is: A separate account will invest in a number of different securities. A) periodic payment immediate annuity. The number of annuity units rises once annuitization begins. C)A 10% penalty plus the payment of ordinary income tax on all of the funds withdrawn. All of the following investment strategies offer either fully or partially tax-deductible contributions to individuals who meet eligibility requirements EXCEPT: How to Rollover a Variable Annuity Into an IRA. must precede every sales presentation. The funds are not liquid due to the surrender fees, and there is also a 10% penalty on withdrawals before age 59-. an annuitant lives longer than expected. B)Capital gains taxation on the earnings withdrawn in excess of the owner's basis. This guideline has been prepared for use by Federal agencies. *Insurance companies introduced the variable annuity as an opportunity to keep pace with inflation. III. How is the distribution taxed? C) The investor's concerns about taxes. *Annuity death benefits are generally paid in a lump sum. 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. A customer has a nonqualified variable annuity. D)partially a tax-free return of capital and partially taxable. *A variable annuity may only be surrendered during the accumulation period. a variable annuity does not guarantee an earnings rate of return. 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) waiver of premium C)the invested money will be professionally managed according to the issuers' investment objectives. Transcribed image text: 6. The number of annuity units rises once annuitization begins. Distributions from such an annuity are computed on a LIFO basis with the income taxed first. The AG49-A Revisions D) The investment risk is shared between the insurance company and the policyowner. *VAs are less suitable for individuals who have not yet made maximum contributions to other retirement accounts such as IRAs and 401ks. (Check all that apply.) B) 0. B) The death benefit cannot ever be more than the guaranteed benefit. Question #16 of 48Question ID: 606807 Variable annuities involve underlying equity investments in a separate account. 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. For a retired person, which of the following investments would provide the greatest protection against inflation? Reference: 12.1.2 in the License Exam, Question #39 of 48Question ID: 721469 can be sold by someone with only an insurance license They are also riddled with fees, which can cut into profits. A)not suitable D)the rate of return is determined by the underlying portfolio's value. B)100% taxable. 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. The number of annuity units varies. B)II and III. Assuming that the payroll for the last week of the year is to be paid on December 313131, journalize the following entries: b. c. The separate account provides for a guaranteed minimum return. A)II and IV. Question #26 of 48Question ID: 606811 A)defined contribution plans. 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. This chapter was updated on 15 December, 2005. Salaries:SalessalariesWarehousesalariesOfficesalaries$670,000110,000234,000$1,014,000Deductions:IncometaxwithheldSocialsecuritytaxwithheldMedicaretaxwithheldU.S. B) 10% penalty plus payment of ordinary income tax on all funds withdrawn. B)I and III. As of March 03, 2023, had a relative dividend yield of % compared to the industry median of %. B)I and II B) It will be lower. Annuities are complicated products, so that may be easier said than done. I. 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. Therefore only a fixed annuity could be considered as suitable. D) variable annuities may only be sold by registered representatives. C) be returned to the separate account. Often used for retirement planning purposes, it is meant to provide a regular (monthly, quarterly, annual) income stream, starting at some point in the future. What Are the Biggest Disadvantages of Annuities? 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. D) the number of annuity units becomes fixed when the contract is annuitized. A prospectus for a variable annuity contract: B)Variable annuities. Reference: 12.2.1 in the License Exam. This customer has no spouse or dependents, which negates the value of the death benefit. C) Universal variable life policy. an annuitant dies sooner than expected. C) A 10% penalty plus the payment of ordinary income tax on all of the funds withdrawn. C)III and IV. A)the state banking commission. A) A variable annuity An accumulation unit in a variable annuity contract is: must provide full and fair disclosure. B) fixed payments for 10 years, followed by variable payments for life. A)number of annuity units. B) The investor's marital status. Licensed to sell Variable Annuities in the following state(s): FL, TX . This role is also eligible for annual short-term incentive compensation. However, it does guarantee payments for life (mortality). "Variable Annuities: What You Should Know," Page 3. 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. The payout of an annuitized variable annuity account changes from month to month in a manner determined by which of the following? do not have a separate account 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. 5 Q All of the following are characteristics of variable whole life EXCEPT the premium is level there is no guaranteed cash value there is no guaranteed minimum death benefit. Variable annuities must be registered with: Variable annuities were introduced in the 1950s as an alternative to fixed annuities, which offer a guaranteedbut often lowpayout during the annuitization phase. Vaccine has decreased the incidence. Which Earns More: Variable or Fixed Annuities? D) There is no guarantee regarding the investment results of the separate account. Reference: 12.1.2.1.2 in the License Exam. D) Age 27, saving for first home. The growth portion is subject to a 10% penalty. As part of the registration requirements, a prospectus must be filed and distributed to prospective investors. D) tax free. 's dividend yield was % last year. I. variable An immediate annuity consists of a Single Premium T has an annuity that guarantees an income payment for the rest of his life. About Us 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)reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. For a nonqualified variable annuity, cost basis for the annuitant would use the after-tax dollars contributed. An annuitant assumes the investment risk of a variable annuity and is not protected by the insurance company from capital losses. \hspace{10pt} \text{Warehouse salaries} & 110,000 & \hspace{10pt} \text{Social security tax withheld} & 51,714\\ Fixed income instruments, like bonds and fixed annuities, are subject to purchasing power risk. C) IRAs. IBM Noida, Uttar Pradesh, India1 month agoBe among the first 25 applicantsSee who IBM has hired for this roleNo longer accepting applications. (The exception is the fixed income annuity, which has a moderate to high payout that rises as the annuitant ages). Immediate annuities purchase annuity units directly. If the contract holder dies before the period expires, the remaining payments are made to the beneficiary. D) payments continue until age 70-. D)Investment risk. 111. 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. Life income riders are best suited for those who anticipate a lengthy retirement and are generally not yet retired when making the VA purchase. B) payment guarantee. Deal with mathematic Math is all about solving equations and finding the right answer. On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity). \end{array} The amount taxed is the amount of the lump-sum payment minus the deceased's cost basis in the investment. a variable annuity guarantees payments for life. 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. Consequently, the client pays taxes only on the growth portion of the withdrawal ($10,000). Qualified Longevity Annuity Contract (QLAC): Definition, Taxes, and Example, Present Value of an Annuity: Meaning, Formula, and Example, Future Value of an Annuity: What Is It, Formula, and Calculation, Calculating Present and Future Value of Annuities, Present Value Interest Factor of Annuity (PVIFA) Formula, Tables. B)Universal variable life policy. Job Classification: Corporate - Legal and Compliance. All of the following statements regarding variable annuities are true EXCEPT: A) variable annuities offer the investor protection against capital loss. A) mortality guarantee. C)municipal bonds. C) II and IV. A)contact the issuer of the clients existing VA contract to facilitate the clients surrender of the contract. C)3800. A 3 C)none of these. That can adversely affect your returns over the long term, compared with other types of investments. *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. Reference: 12.3.3 in the License Exam. Variable annuities are designed to combat inflation risk. The number of variable annuity accumulation units can rise during the accumulation period when additional units are being purchased. C) II and IV. Designed to protect against inflation. 6102..55.001) is being updated on an ongoing basis. C) with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed do not have a separate account Reference: 12.1.2.1.1 in the License Exam. *A variable annuity does not guarantee an earnings rate because earnings will depend on the performance of the separate account. This would not align with the couple's criteria for coverage as long as they both live. Expert Answer. He makes the following four statements, all of which are true EXCEPT C) III and IV. The growth portion is taxed as a capital gain. A 1 The applicant and possibly the agent initial any changes made. The value of an annuity unit varies from month to month according to the performance of the separate account in comparison to the assumed interest rate. Future annuity payments will vary according to the separate account's performance. A)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 D) I and III. A) partially a tax-free return of capital and partially taxable. What Are Ordinary Annuities, and How Do They Work (With Example)? The value of the annuity units is fixed. Underlying equity investments T, age 70, withdraws cash from a profit-sharing plan and purchases a Straight Life Annuity. C) It will stay the same. C) Unit refund life option Changes in payments on a variable annuity correspond most closely to fluctuations in the: These contracts come with high surrender charges. A) Life-only annuity 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. B) Age 78, retired for 20 years, lives comfortably and wants to leave all liquid assets to children This cloud model is composed of five essential characteristics, three service models, and four deployment models. Therefore, ordinary income taxes will apply to the entire $10,000. An immediate annuity is designed to pay an income one time-period after the immediate annuity is bought. A)100% tax free. *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. Ideally they should be funded with readily available cash rather than using funds liquidated from existing investments. You purchase a variable annuity contract by making either a single purchase payment or a series of purchase payments. Drives - are hardwired characteristics of the brain that correct deficiencies or maintain an internal equilibrium by producing emotions to energize individuals. However, the web version (cat. C) During the annuity period. D) I and IV. For an insurance company, mortality risk turns out unfavorably if: Since , has paid out quarterly dividends ranging from $0.00 to $0.00 per share. 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. 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: Inflation-hedging, using both tax deferral combined with market growth potential, is made possible by variable annuities #. His objective is monthly income that he can receive after he retires to supplement his small pension and social security benefits. A) Fixed Annuity A) Capital gains taxation on the earnings withdrawn in excess of the owner's basis. B) variable annuities. In a variable life annuity with 10-year period certain, a contract holder receives: The income was deferred from tax over the plan's life, so it is taxable as ordinary income once distributed. The holder of a variable annuity receives the largest monthly payments under which of the following payout options? C)complete all paper work to purchase the annuity contract and obtain the clients signature immediately. Your client has a large sum of money to invest from the proceeds of the sale of his home. The accumulation unit's value is used to calculate the total value of the account. Your customer in his early 30s has received a modest inheritance from a relative. Once a variable annuity has been annuitized: *Contributions to a nonqualified variable annuity are not tax deductible. "Variable Annuities: What You Should Know," Page 10. Instructions\textsf{\textcolor{#4257b2}{Instructions}}Instructions Determine whether the following events are independent or dependent. b. The client's investment objectives, tax bracket, investment experience and risk tolerance all align well with a VA recommendation. 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. 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. D) I and II. Question #44 of 48Question ID: 606797 Which of the following recommendations would best meet the customer profile? The remainder of the premium is invested in the separate account. He makes several statements regarding the contract. 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. Question #19 of 48Question ID: 606826 B) with guaranteed minimum withdrawal benefits (GMWBs) the periodic payments can be monthly, quarterly or annually Investopedia does not include all offers available in the marketplace. Which of the following statements regarding variable annuities are TRUE? Find the per-day expense for one of these travelers who had a z-score of -1.6. c. A Bargain Times Vacation Blog writer claimed to have done this vacation for a cost of$710 per person. An annuity payment is the dollar amount of the equal periodic payment in an annuity environment. Based on the information given in the question, the VA recommendation would not be suitable. a. A)Purchasing power risk. Of the total payroll for the last week of the year, $30,000\$30,000$30,000 is subject to unemployment compensation taxes. \hspace{7pt} a. December 303030, to record the payroll. D)all return of cost basis and nontaxable, Annuitized payments from a variable annuity are viewed for tax purposes as part earnings and part cost basis. A)I and IV. A)value of underlying securities held in the separate account. A) II and III. I. C)I and IV. These contracts cover both lives and will continue to make payments until the last spouse dies.

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