If an investor has purchased an immediate variable annuity, which of the following statements best describe the investment? B) the state insurance department. D)Variable annuity. D)II and III. Of the answer choices given the best would be to reevaluate the recommendation based on the new information tendered by the client. Are Variable Annuities Subject to Required Minimum Distributions? Clusters of vesicles in various stages. "Variable Annuities: What You Should Know," Page 10. Of the total payroll for the last week of the year, $30,000\$30,000$30,000 is subject to unemployment compensation taxes. Annuity units are units of ownership when the contract is in the payout stage. Fixed annuities pay a fixed monthly benefit which loses purchasing power if there is inflation. Your customer in his early 30s has received a modest inheritance from a relative. The fixed annuities, indexed annuities, and variable annuities are some of the major types of annuities, of which one may find immediate annuities and deferred annuities. B)value of annuity units. A) partially a tax-free return of capital and partially taxable. The work environment characteristics are normal office conditions. 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. 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. is required by the Securities Act of 1933. D) Any time before the accumulation period. A)defined contribution plans. A) periodic payment immediate annuity. A) I and III. B) The policyowner. For this potential advantage, the investor, rather than the insurance company, assumes the investment risk. II. The funds are not liquid due to the surrender fees, and there is also a 10% penalty on withdrawals before age 59-. C)3800. D) Two-thirds of the withdrawal is taxable as ordinary income. *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. *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 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 & \underline{\underline{\$1,014,000}} & \hspace{10pt} \text{U.S. savings bonds} & 30,420\\ \hspace{10pt} Medicare, 1.5%1.5\%1.5% A)II and III. Investopedia requires writers to use primary sources to support their work. Post navigation Over the past five years, 's dividend yield has averaged % per year. a variable annuity does not guarantee an earnings rate of return. B) During the accumulation period. D)the rate of return is determined by the underlying portfolio's value. When a variable annuity contract is annuitized, the number of annuity units is fixed. U.S. Securities and Exchange Commission. If the annuitant should die during that time, any death benefit would be paid to a beneficiary designated by the annuitant at the time the annuity was purchased. The downside was that the buyer was exposed to market risk, which could result in losses. On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity). B) The proceeds minus John's cost basis taxed as ordinary income at Sue's tax rate. Reference: 12.3.2.1 in the License Exam. Which of the following are defined as securities? Question #37 of 48Question ID: 606817 An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are Get Started. Reference: 12.3.3 in the License Exam. An investor who purchases a fixed annuity contract assumes purchasing-power risk. Reference: 12.1.1 in the License Exam. Which of the following recommendations would best meet the customer profile? The value of the customer's account is converted into annuity units if and when the customer decides to annuitize the contract. D) tax free. B)Two-thirds of the withdrawal is taxable as ordinary income. The fees on variable annuities can be quite hefty. With a fixed annuity, by contrast, the insurance company assumes the risk of delivering whatever return it has promised. Options. A) be paid to a designated beneficiary. A 58-year-old individual near retirement who is in good health and anticipates a lengthy retirement Question: The following are characteristics of a public conglomerate: I) It is designed to operate various divisions for the long run. Vaccine has decreased the incidence. Annuity death benefits are generally paid in a lump sum. A. An annuity payment is the dollar amount of the equal periodic payment in an annuity environment. An annuity is an insurance product that promises to pay out income at a future date based on invested funds. 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 company's well-known Rock symbol is an icon of strength, stability, expertise and innovation that has stood the test of time. C) such an annuity is designed to combat inflation risk. Job Classification: Corporate - Legal and Compliance. A) Ordinary income tax on earnings exceeding basis. She will receive the annuity's entire value in a lump-sum payment. All of the following statements regarding variable annuities are true EXCEPT: A) variable annuities offer the investor protection against capital loss. A Variable Annuity has which of the following characteristics? C) II and III. A) I and III. The money paid in will be returned tax free, but the earnings portion will be taxed as ordinary income. 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. Distributions to the annuitant will fluctuate during the payout period. D) value of accumulation units. Reference: 12.2.1 in the License Exam. A customer is receiving annuitized payments from a variable annuity. B) variable annuities are classified as insurance products. Distribution can take place before or during any solicitation for sale. D) The fact that periodic payments into the contract may increase or decrease. 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. A) changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. The client agrees to purchase the contract and informs the RR that he will be cashing out a VA he purchased 2 years ago to fund the new contract and will forward the check as soon as he receives it. The nature of the securities invested in-bonds and growth stocks-makes it necessary that sales representatives and their principals be licensed in securities as well as insurance. Once a customer annuitizes a variable annuity, which of the following statements are TRUE? Owners of variable annuities, like owners of mutual fund shares, may vote on changes in investment policy and for an investment adviser. 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. The growth portion is taxed as a capital gain. D)I and IV. An annuitant assumes the investment risk of a variable annuity and is not protected byt he insurance company from capital losses. national origin, genetics, disability, age, veteran status, or any other characteristic protected by law. 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. For a retired person, which of the following investments would provide the greatest protection against inflation? Suggesting that loans or drawing equity from a home to fund VA contracts have also been targeted as abusive sales practices. order now. Of the 4 client profiles below, which might be the best suited for a variable annuity recommendation? Reference: 12.1.4.1 in the License Exam. 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. Reference: 12.1.2 in the License Exam. Since the client is older than 59 at the time of distribution, the additional 10% penalty tax is not incurred. 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. II. I. the state insurance commission. A variable annuity does not guarantee an earnings rate because earnings will depend on the performance of the separate account. *Insurance companies introduced the variable annuity as an opportunity to keep pace with inflation. Question #15 of 48Question ID: 606804 Distributed along a dermatome. Question #35 of 48Question ID: 606810 C)Money market fund. When a partial withdrawal is made from an annuity, the earnings are considered to be taken out first for tax purposes (or LIFO). Salaries:SalessalariesWarehousesalariesOfficesalaries$670,000110,000234,000$1,014,000Deductions:IncometaxwithheldSocialsecuritytaxwithheldMedicaretaxwithheldU.S. Final answer. These contracts come with high surrender charges. The remainder of the premium is invested in the separate account. A)There is no tax as the withdrawal is considered return of capital. 's dividend yield was % last year. An important basic characteristic of common stocks that makes them a suitable type of investment for the separate account of variable annuities is: A) variable annuities offer the investor protection against capital loss. If the annuitant dies during the accumulation period, his/her beneficiary will receive the promised annuity payments. guarantees payments for a certain period of time. D) It cannot be determined until the April return is calculated. Suggesting that loans or drawing equity from a home to fund VA contracts have also been targeted as abusive sales practices. 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? B)I and III. C)III and IV. D) I and III. \hspace{10pt} \text{Sales salaries} & \$\hspace{5pt} 670,000 & \hspace{10pt} \text{Income tax withheld} & \$198,744\\ Generally, a life-only contract pays the most per month because payments cease at the annuitant's death. are purchased primarily for their insurance features Contributions to a nonqualified variable annuity are not tax deductible. A the safety of the principal invested B the yield is always higher than bond yields. *An immediate annuity has no accumulation period. The tax on this is $2,800 ($10,000 x 28%). All of the following are true about annuities EXCEPT: they have all the same characteristics as life insurance. Science Health Science Nursing. must be filed with FINRA. Variable annuities provide protection from inflation because their monthly income can increase depending on the separate account's performance. Variable annuity salespeople must register with all of the following EXCEPT: Which of the following are defined as securities? The holder of a variable annuity receives the largest monthly payments under which of the following payout options? Carefully look at your options when choosing an annuity. A) a minimum rate of return is guaranteed. He originally invested $29,000 4 years ago; it now has a value of $39,000. Because the client is older than age 59-, he does not pay 10% premature distribution penalty tax. D) reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. D) 4200. The most suitable option and one considered effective for married couples is a single joint and last survivor contract. An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are. We also reference original research from other reputable publishers where appropriate. 111. The upside was the possibility of higher returns during the accumulation phase and a larger income during the payout phase. D) Variable annuity. Here is how guaranteed lifetime annuities work. 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. If at all you go deeper, then you will find a wide range of annuity products from a variety of companies. When a variable contract is annuitized (distributed in regular payments, not as a lump sum), the number of accumulation units is multiplied by the unit value to arrive at the account's current value. As with all tax-deferred accounts, municipal bonds are not appropriate investments because interest earned on municipals is already tax exempt at the federal level. Indexed annuity owners receive credited interest tied to the fluctuations of the linked index An immediate annuity consists of a single premium An immediate annuity has a single premium. A) The fact that the annuity payment may increase or decrease. D) each annuity unit's value varies with time, but the number of annuity units is fixed. When the annuitization option is selected, each payment represents both capital and earnings. C) the yield is always higher than bond yields. The growth portion is taxed as ordinary income. Which of the following is not a characteristic of a program module? B) the client may vote for the board of directors or board of managers. B)I and III. A trend is formed from non-repetitive actions of people. A) The fact that the annuity payment may increase or decrease. A single lump-sum investment is made, and payments begin immediately, since the investor has purchased annuity units. This recommendation is: A) mutual fund units. D)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. II) It has an internal capital market wherein each division competes for funds. D)Dow Jones Industrial Average. C) insurance companies keep variable annuity funds in separate accounts from other insurance products. A)not suitable D) each annuity unit's value varies with time, but the number of annuity units is fixed. C) Corporate bonds. A security is any investment for profit with management performed by a third party. *A joint life with last survivor contract covers multiple annuitants and ceases payments at the death of the last surviving annuitant. If the contract holder dies before the period expires, the remaining payments are made to the beneficiary. All of the following investment strategies offer either fully or partially tax-deductible contributions to individuals who meet eligibility requirements EXCEPT: Variable annuities gave buyers a chance to benefit from rising markets by investing in a menu of mutual funds offered by the insurer. B) a variable annuity contract is not required to be sold by prospectus because it is an insurance contract The value of a variable annuity is based on the performance of an underlying portfolio of sub accounts selected by the annuity owner. Needs - are goal-directed forces that people experience. C)the yield is always higher than bond yields. B) Exchange traded Funds (ETFs) or Exchange traded Notes (ETNs) d. Each month the payment will increase, decrease, or remain the same as the previous month's payment . B) During the accumulation period. In deciding whether to put money into a variable annuity versus some other type of investment, its worth weighing these pros and cons. C) Age 40, currently unemployed An accumulation unit in a variable annuity contract is: A) Money market fund. Variable annuities are riskier than fixed annuities because the underlying investments may lose value. An annuity is an agreement for one person or organization to pay another a series of payments. Reference: 12.2.1 in the License Exam. Distribution of dividends occurs during the accumulation period. Which of the following statements regarding variable annuities are TRUE? B) payment guarantee. D)Joint and last survivor annuity. C)the SEC. Guaranteed Lifetime Annuity: How They Work, When They Pay You, This is also generally true of retirement plans. If your client, who is in the 28% tax bracket, makes a lump-sum withdrawal of $15,000, what tax liability results from the withdrawal? The value of these units varies with the performance of the separate account. C)insurance companies keep variable annuity funds in separate accounts from other insurance products. C) taxed as ordinary income only to the extent of earnings. C)municipal bonds. Each of the remaining statements are true. The investor has already paid tax on the contributions but the earnings have grown tax-deferred. This customer has no spouse or dependents, which negates the value of the death benefit. ($5,000) to a stock fund. \hspace{10pt} Federal unemployment (employer only), 0.8%0.8\%0.8%. 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. What Are the Distribution Options for an Inherited Annuity? This guideline has been prepared for use by Federal agencies. a variable annuity does not guarantee payments for life. C) II and IV. C) II and IV. A deferred annuity is an insurance contract that promises to pay the buyer a regular stream of income, or a lump sum, at some date in the future. 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. B)mutual fund units. U.S. Securities and Exchange Commission. An annuity factor is taken from the annuity table, which considers, for example, the investor's sex and age. A)II and IV. \hspace{7pt} b. December 303030, to record the employers payroll taxes on the payroll to be paid on December 313131. D)each annuity unit's value is fixed, but the number of annuity units varies with time. A)Fixed annuity contract with a discussion regarding purchasing power risk C) The insurance company. B)4200. A passion for serving customers and a personal commitment to following through in a dynamic, fast-paced environment. For an insurance company, mortality risk turns out unfavorably if: An Immediate Annuity is designed to provide each of the following features, EXCEPT: The creation of an estate. Which Earns More: Variable or Fixed Annuities? B) II and III. D) I and III. D)II and III. If your client, who is in the 28% tax bracket, makes a lump-sum withdrawal of $15,000, what tax liability results from the withdrawal? C) II and IV B) The death benefit cannot ever be more than the guaranteed benefit. Describe. A) a minimum rate of return is guaranteed. In addition, if the customer is not at least 59-, there will be a tax penalty of an additional 10%. If the contract holder dies before the period expires, the remaining payments are made to the beneficiary. A)I and IV. Reference: 12.3.1 in the License Exam, Question #30 of 48Question ID: 606833 *When a variable contract is annuitized (distributed in regular payments, not as a lump sum), the number of accumulation units is multiplied by the unit value to arrive at the account's current value. D)partially a tax-free return of capital and partially taxable. B) Life annuity. These include white papers, government data, original reporting, and interviews with industry experts. Usually the term "annuity" relates to a contract between an individual and a life insurance company. 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 Question #22 of 48Question ID: 606803 D) I and IV C)with guaranteed minimum withdrawal benefits (GMWBs) the periodic payments can be monthly, quarterly or annually What is the taxable consequence of this withdrawal to your client? The growth portion is taxed as a capital gain. Variable annuity salespeople must register with all of the following EXCEPT: A) FINRA. For a retired person, which of the following investments would provide the greatest protection against inflation? The value of accumulation and annuity units varies with the investment performance of the separate account. have investment risk that is assumed by the investor Single payment deferred annuity. *Fixed income instruments, like bonds and fixed annuities, are subject to purchasing power risk. B) IPO. no. I. If an insurance holder dies sooner than expected, the insurance company will have to pay the death benefit sooner. Cashing out life insurance policies or VAs where steep surrender charges are likely to exist, particularly in the earlier years of those contracts, is also considered abusive. A 10% penalty applies only if distributions begin before age 59-. The following changes have been incorporated into Special Publication 800145, as of the date indicated - .