If this client is in the payout phase, how would his April payment compare to his March payment? a variable annuity does not guarantee an earnings rate of return. C)Life annuity. B) During the accumulation period. 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. A) periodic payment immediate annuity. B) I and II. Based on this information the RR should: D) II and IV. IBM hiring Senior Practitioner- Policy Admin in Noida, Uttar Pradesh D) There is no guarantee regarding the investment results of the separate account. the agent must be licensed in both insurance and securities. View full document. required to be located off of the company's premises. A trend is formed from non-repetitive actions of people. You have 4 clients each expressing interest in a variable annuity contract. Question #43 of 48Question ID: 606809 C) III and IV Variable Annuities Flashcards | Quizlet Reference: 12.1.2.1.1 in the License Exam. Question #36 of 48Question ID: 606805 regulated under both securities and insurance laws. Diagnosis is made by punch biopsy. The value of the annuity units varies. C)not suitable because a lifetime income rider is only for someone who is already retired The AG49-A Revisions Simple and general annuities problems with solutions Immediate annuities purchase annuity units directly. D)Variable annuity contract with a discussion regarding legislative risk, A VA with its investments in the separate account subject to market risk would not align with the customer's objective. 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. do not have a separate account D) 100% tax deferred. Reference: 12.3.2.4 in the License Exam. Variable Annuities. Once a customer annuitizes a variable annuity, which of the following statements are TRUE? C)such an annuity is designed to combat inflation risk. A) I and IV. An investor owning which of the following variable annuity contracts would hold accumulation units? If the annuitant dies during the accumulation period, his/her beneficiary will receive the promised annuity payments. Fixed annuities. are purchased primarily for their insurance features A) It will be higher. At the end of the year your account has a value of 10750. It is innate and universal. For a nonqualified variable annuity, cost basis for the annuitant would use the after-tax dollars contributed. A) defined contribution plans. Your 55-year-old client invested $50,000 four years ago in a nonqualified variable annuity. *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. A) Fixed Annuity However, because the client is not yet age 59- when making the withdrawal, he also pays a 10% penalty, or $1,000. D) accumulation shares. Question #33 of 48Question ID: 606832 A) an accounting measure used to determine payments to the owner of the variable annuity. Before buying a variable annuity, investors should carefully read the prospectus to try to understand the expenses, risks, and formulas for calculating investment gains or losses. Practice all cards. The entire amount is taxed as ordinary income. Because the client is older than age 59-, he does not pay 10% premature distribution penalty tax. *Contributions to a nonqualified variable annuity are not tax deductible. Francisco R. - Financial Professional - Prudential Financial | LinkedIn Reference: 12.1.2 in the License Exam, Question #39 of 48Question ID: 721469 The work environment characteristics are normal office conditions. The number of annuity units becomes fixed when the contract is annuitized; it is the value of each unit that fluctuates. A security is any investment for profit with management performed by a third party. Your customer in his early 30s has received a modest inheritance from a relative. Ted's Bio; Fact Sheet; Hoja Informativa Del Ted Fund; Ted Fund Board 2021-22; 2021 Ted Fund Donors; Ted Fund Donors Over the Years. Round to the nearest hundredth of a percentile. The remainder of the premium is invested in the separate account. A)not suitable Refinancing a home to draw out equity has been identified by FINRA as an abusive sales tactic regarding the sales of VAs. continues payments as long as one annuitant is alive. An immediate annuity is designed to pay an income one time-period after the immediate annuity is bought. B) Life annuity with period certain Future annuity payments will vary according to the separate account's performance. All of the following statements regarding variable annuities are true EXCEPT: The number of accumulation units can rise during the accumulation period. *Variable annuity contracts were devised to help investors keep pace with inflation. 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. Lifetime vs. fixed period annuities D) The fact that periodic payments into the contract may increase or decrease. Suggesting that loans or drawing equity from a home to fund VA contracts have also been targeted as abusive sales practices. Your customer in his early 30s has received a modest inheritance from a relative. C) II and III. A)II and IV. a variable annuity guarantees payments for life. D)I and III. 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 Shortening the Securities Transaction Settlement Cycle A registered representative's (RR) customer is speaking of a variable life insurance contract he owns. Fixed income instruments, like bonds and fixed annuities, are subject to purchasing power risk. D) expense guarantee. The growth portion is taxed as ordinary income. The creation of an estate. A variable annuity is both an insurance and a securities product. 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. PDF Variable Annuities: What You Should Know - SEC For a retired person, which of the following investments would provide the greatest protection against inflation? B) The investor's marital status. B)a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero An 18-year-old, unmarried high school student sought a safe investment for a $30,000 bequest until after she graduated from college. Then find the probability of the event. A) variable annuities offer the investor protection against capital loss. a variable annuity has which of the following characteristics Is F&G Annuities & Life Inc (FG) a Good Dividend Stock? | AAII *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. 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. a variable annuity does not guarantee payments for life. FINRA. B) suitable if she has enough equity in the home to fund the variable annuity without cashing out the other VA contract If the owner of a variable annuity dies during the accumulation period, any death benefit will: Sample problems from Chapter 9 . A)Corporate debt securities Annuities due are a type of annuity where payments are made at the beginning of each payment period. B)II and III. The number of annuity units is fixed at the time of annuitization. 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) Growth mutual funds. They can be classified by: Nature of the underlying investment - fixed or variable If an investor has purchased an immediate variable annuity, which of the following statements best describe the investment? A) Money market fund. The upside was the possibility of higher returns during the accumulation phase and a larger income during the payout phase. D) The investment risk is shared between the insurance company and the policyowner. The accumulation unit's value is used to calculate the total value of the account. The owner of a variable annuity has all of the following rights EXCEPT A) I and II. Reference: 12.3.4 in the License Exam. B) The entire $10,000 is taxable as ordinary income. 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: D) reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. C) 10 years of variable payments. D) I and III B)Two-thirds of the withdrawal is taxable as ordinary income. A) There is no risk in a variable annuity. The annuitized payments are viewed for tax purposes as Reference: 12.1.2 in the License Exam, Question #23 of 48Question ID: 901858 A) partially a tax-free return of capital and partially taxable. PGIM Fixed Income has over $900 billion in assets under management across a broad array of fixed . D)I and IV, Universal variable life policies are insurance company products that should be purchased primarily for the insurance features they offer rather than as an investment. MetLife, Inc. Senior Customer Care Advocate Annuities ($22 per hour C)suitable due to the death benefit features of a variable annuity. D) Two-thirds of the withdrawal is taxable as ordinary income. The number of variable annuity accumulation units can rise during the accumulation period when additional units are being purchased. Of the answer choices given the best would be to reevaluate the recommendation based on the new information tendered by the client. IBM is a global brand and has its presence in 170 countries and operates . *Payments from a variable annuity depend on the securities' value in the separate account's underlying investment portfolio. Travel Times Journal found that the average per person cost of a 10-day trip along the Pacific coast, per person, is $1,015. Payments from a variable annuity depend on the securities' value in the separate account's underlying investment portfolio. An investor who has purchased a nonqualified variable annuity has the right to: 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. How to Rollover a Variable Annuity Into an IRA. B) the number of annuity units is fixed, and their value remains fixed. 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. *Since this is a nonqualified annuity (with no tax deduction), the client pays taxes only on the growth portion or, in this case, $10,000. The value of the annuity units is fixed. (primary needs). B) The death benefit cannot ever be more than the guaranteed benefit. Nicks Enterprises has purchased a new machine tool that will allow the company to improve the efficiency of its operations. B) The policyowner. 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: *When money is deposited into the annuity, it is purchasing accumulation units. $63,000 b.$51,000 c. $18,000 d.$6,000. The original investment has grown to a value of $60,000. Question #42 of 48Question ID: 606830 D) II and III. He makes the following four statements, all of which are true EXCEPT Once a variable annuity has been annuitized: D)Any tax due is deferred. A) Joint tenants annuity. *Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. Investopedia does not include all offers available in the marketplace. A) be paid to a designated beneficiary. An 18-year-old, unmarried high school student sought a safe investment for a $30,000 bequest until after she graduated from college. C)number of accumulation units. He makes several statements regarding the contract. Do whatever you want with a Learn About Annuities and Their Myths - F&G: fill, sign, print and send online instantly. ($5,000) to a stock fund. variable An immediate annuity consists of a Single Premium T has an annuity that guarantees an income payment for the rest of his life. Surrender fees and penalties for early withdrawal. All of the following are characteristics of variable annuity contracts Variable annuities operate in similar ways to . Variable annuities are designed to combat inflation risk. Uses in Investing, Pros, and Cons, Indexed Annuity: Definition, How It Works, Yields, and Caps. 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. \hspace{10pt} \text{Sales salaries} & \$\hspace{5pt} 670,000 & \hspace{10pt} \text{Income tax withheld} & \$198,744\\ B)fixed in value until the holder retires. have investment risk that is assumed by the investor B) The proceeds minus John's cost basis taxed as ordinary income at Sue's tax rate. Home; About. Based only on these facts, the variable annuity recommendation is The value of a variable annuity is based on the performance of an underlying portfolio of sub accounts selected by the annuity owner. An accumulation unit in a variable annuity contract is: II. D)Variable annuity. 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 It's somewhat similar to a variable life insurance policy in that: You can choose how the product's value is invested. The annuity unit's value represents a guaranteed return. A variable annuity is a combination of 2 products: an insurance contract and a mutual fund. Your 65-year-old client owns a nonqualified variable annuity. A) II and III. A) The fact that the annuity payment may increase or decrease. If an investor has a fixed-annuity contract with an insurance company, which of the following risks is assumed by the investor? C) The investor's concerns about taxes. C) Universal variable life policy. Annuities due are a type of annuity where payments are made at the beginning of each payment period. Question #28 of 48Question ID: 606821 D) III and IV. Following the transition to T+1 in the U.S. markets, Commission staff will continue to work with industry leaders, public interest advocates, investors and other regulators to assess the future feasibility of a T+0 settlement standard cycle, and seek to identify ways to overcome the challenges associated with such a move, as articulated in the . A variable annuity's separate account is: A) used for the investment of monies paid by variable annuity contract holders B) separate from the insurance company's general investments C) operated in a manner similar to an investment company D) as much a security as it is an insurance product All of the above Guaranteed Lifetime Annuity: How They Work, When They Pay You, This is also generally true of retirement plans. 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. Reference: 12.3.3 in the License Exam. Question #40 of 48Question ID: 606800 Question #13 of 48Question ID: 606822 When a partial withdrawal is made from an annuity, the earnings are considered to be taken out first for tax purposes (or LIFO). 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. Which of the following statements regarding variable annuities are TRUE? 10.1 This chapter addresses a number of ABS statistics relating to the economically active population which were not discussed elsewhere. A) a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero He wants to ensure that the client, in addition to meeting suitability requirements, is aware of certain variable annuity contract characteristics. 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. A) I and III. This cloud model is composed of five essential characteristics, three service models, and four deployment models. C) a variable annuity contract does not guarantee any type of return D) the payout plans provide the client income for life. Which of the following statements regarding variable annuities are TRUE? Post navigation Deferred Annuity Definition, Types, How They Work, What Is a Fixed Annuity? A single lump-sum investment is made, and payments begin immediately, since the investor has purchased annuity units. Consequently, the client pays taxes only on the growth portion of the withdrawal ($10,000). Skylar Clarine is a fact-checker and expert in personal finance with a range of experience including veterinary technology and film studies. Reference: 12.3.1 in the License Exam. D)0. A 10% penalty applies only if distributions begin before age 59-. B)I and III. B) contact the issuer of the clients existing VA contract to facilitate the clients surrender of the contract. guarantees payments for a certain period of time. With regard to a variable annuity, all of the following may vary EXCEPT: *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. Changes in payments on a variable annuity correspond most closely to fluctuations in the: Which of the following statements is not true about the characteristics of a trend? Variable annuities grow tax-deferred, so you dont have to pay taxes on any investment gains until you begin receiving income or make a withdrawal. Try B) taxed as ordinary income. 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. Variable annuities should be considered long-term investments due to the limitations on withdrawals. is required by the Securities Act of 1933. D) I and III. B) It will be lower. The separate account performance compared to last month's performance. a variable annuity does not guarantee payments for life. 's dividend yield was % last year. A) A variable annuity *A joint life with last survivor contract covers multiple annuitants and ceases payments at the death of the last surviving annuitant. C)the invested money will be professionally managed according to the issuers' investment objectives. Immediate life annuity with 10-year period certain. C) IRAs. 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 The following information about the payroll for the week ended December 303030 was obtained from the records of Vienna Co.: Salaries:Deductions:Salessalaries$670,000Incometaxwithheld$198,744Warehousesalaries110,000Socialsecuritytaxwithheld51,714Officesalaries234,000Medicaretaxwithheld15,210$1,014,000U.S. If an investor has a fixed-annuity contract with an insurance company, which of the following risks is assumed by the investor? B) Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. Variable annuities are riskier than fixed annuities because the underlying investments may lose value. B)100% taxable. *Contributions to a nonqualified annuity are made with the owner's after-tax dollars. A passion for serving customers and a personal commitment to following through in a dynamic, fast-paced environment. In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. III. What Are Ordinary Annuities, and How Do They Work (With Example)? Variable Annuity: Definition and How It Works, Vs. Fixed Annuity covers more than one person. She may choose to receive monthly payments for the rest of her life. B) II and III The wage for applicants for this position is $45,979.00 per year. Periodic payments are not a consideration because normally the payments into an annuity are level or in a lump sum. Trends Networks and Critical Thinking Module 2 A) Ordinary income tax on earnings exceeding basis. Which of the following is NOT an accurate statement concerning a variable life insurance contract? Describe. The number of annuity units varies. B)a majority vote from the shareholders is required to change the investment objectives. Each of the remaining statements are true. 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. III. Expert Answer. If you die before the payout phase, your beneficiaries may receive a. Based on this information the RR should: B) I and III. A)unsuitable because the return on something as conservative as a variable annuity tends to be low. Based only on these facts, the variable annuity recommendation is Unit 12: Variable Annuities Flashcards | Chegg.com Reference: 12.3.3 in the License Exam, Question #34 of 48Question ID: 606834 These contracts come with high surrender charges. Investopedia requires writers to use primary sources to support their work. Facebook reports that 70%70 \%70% of their users are from outside the United States and that 50%50 \%50% of their users log on to Facebook daily. Table1. If your customer invests in a variable annuity and chooses to annuitize at age 65, which of the following statements are TRUE? Variable annuities are designed to combat inflation risk. Listing tax-deferred growth as an objective for retirement income, which of the following investments is most suitable?