a variable annuity has which of the following characteristics

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. All of the following statements concerning a variable annuity are correct EXCEPT: A) a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero Fixed Annuity, Retirement Annuities: Know the Pros and Cons. (primary needs). *Variable annuity contracts were devised to help investors keep pace with inflation. II. *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. 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. 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. These contracts cover both lives and will continue to make payments until the last spouse dies. B) I and IV. C) The insurance company. B)a majority vote from the shareholders is required to change the investment objectives. As of March 03, 2023, had a relative dividend yield of % compared to the industry median of %. Complete a blank sample electronically to save yourself time and money. 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. *An immediate annuity has no accumulation period. Question #16 of 48Question ID: 606807 C) taxed as ordinary income only to the extent of earnings. Variable annuities must be registered with: Salaries:SalessalariesWarehousesalariesOfficesalaries$670,000110,000234,000$1,014,000Deductions:IncometaxwithheldSocialsecuritytaxwithheldMedicaretaxwithheldU.S. IV. Full-Time. With regard to a variable annuity, all of the following may vary EXCEPT: C)insurance companies keep variable annuity funds in separate accounts from other insurance products. If your customer invests in a variable annuity and chooses to annuitize at age 65, which of the following statements are TRUE? C) Unit refund life option Annuities due are a type of annuity where payments are made at the beginning of each payment period. D)A variable annuity, Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. Question #17 of 48Question ID: 606802 It's somewhat similar to a variable life insurance policy in that: You can choose how the product's value is invested. C)the number of annuity units is fixed, and their value remains fixed. must provide full and fair disclosure. The payout of an annuitized variable annuity account changes from month to month in a manner determined by which of the following? Determine whether the following events are independent or dependent. D) I and II. A prospectus for a variable annuity contract: A)variable annuities will protect an investor against capital loss. U.S. Securities and Exchange Commission. A) the investment portfolio is managed professionally. Reference: 12.1.2 in the License Exam, Question #23 of 48Question ID: 901858 B)cost of living. An annuity is a continuous stream of equal periodic payments from one party to another for a specified period of time to fulfill a financial obligation. A)defined contribution plans. A) Joint tenants annuity. B) The death benefit cannot ever be more than the guaranteed benefit. What Are the Distribution Options for an Inherited Annuity? A)contact the issuer of the clients existing VA contract to facilitate the clients surrender of the contract. III. The tax on this amount is $3,000. C)A 10% penalty plus the payment of ordinary income tax on all of the funds withdrawn. He makes several statements regarding the contract. However, a discussion should occur regarding the risks that are associated with a fixed annuity; 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. A) a minimum rate of return is guaranteed. A registered representative recommends a variable annuity with an income rider to a client. Because the client is older than age 59-, he does not pay 10% premature distribution penalty tax. must be filed with FINRA. Policyholders . D)II and III. B) value of annuity units. An investor who has purchased a nonqualified variable annuity has the right to: Options. If the owner of a variable annuity dies during the accumulation period, any death benefit will: A) two people are covered and payments continue until the second death. B) life income B) The entire $10,000 is taxable as ordinary income. All of the following characteristics are shared by both a mutual fund and a variable annuity's separate account EXCEPT: C) with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed an annuitant lives longer than expected. Investopedia does not include all offers available in the marketplace. Question #20 of 48Question ID: 606808 D) The fact that periodic payments into the contract may increase or decrease. C)Variable annuity contract with a discussion regarding interest rate risk 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. 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 These contracts come with high surrender charges. A trend is formed from non-repetitive actions of people. Fixed annuities. A) number of annuity units. IBM is a global brand and has its presence in 170 countries and operates . \hspace{7pt} a. December 303030, to record the payroll. B)value of annuity units. The growth portion is subject to a 10% penalty. A registered representative explaining variable annuities to a customer would be CORRECT in stating that: An 18-year-old, unmarried high school student sought a safe investment for a $30,000 bequest until after she graduated from college. Of the 4 client profiles below, which might be the best suited for a variable annuity recommendation? Changes in payments on a variable annuity correspond most closely to fluctuations in the: B) The proceeds minus John's cost basis taxed as ordinary income at Sue's tax rate. A registered representative recommends a variable annuity with an income rider to a client. externalities. The amount taxed is the amount of the lump-sum payment minus the deceased's cost basis in the investment. 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. Assuming that the payroll for the last week of the year is to be paid on December 313131, journalize the following entries: Rolling two 222s followed by one 666 on three tosses of a fair die, Use the table 1 and table 2 to complete the table 3 Reference: 12.1.4.1 in the License Exam. D) minimum guaranteed death benefit. D) periodic payment deferred annuity. a variable annuity guarantees payments for life. If the data is normally distributed with standard deviation$198, find the percent of vacationers who spent less than $1,200 per day. A joint-and-last-survivor annuity is a payout option where: an annuitant dies sooner than expected. A trend makes considerable influence or impact. An investor owning which of the following variable annuity contracts would hold accumulation units? B)4200. Life income riders are best suited for those who anticipate a lengthy retirement and are generally not yet retired when making the VA purchase. A)100% tax free. Question #19 of 48Question ID: 606826 Question #22 of 48Question ID: 606803 Suggesting that loans or drawing equity from a home to fund VA contracts have also been targeted as abusive sales practices. (The exception is the fixed income annuity, which has a moderate to high payout that rises as the annuitant ages). can be sold by someone with only an insurance license A) It will be higher. is required by the Securities Act of 1933. 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. D) Variable annuities. All of the following are accurate statements to make to the client EXCEPT C) II and IV. D) I and III. An individual retirement annuity is an investment vehiclesimilar to an individual retirement accountthat is offered by insurance companies. Question #27 of 48Question ID: 606818 C) Age 40, currently unemployed What is the annual cash flow generated from the new machine? D)separate account may consist of mutual funds. \text{Salaries:} && \text{Deductions:}\\ Because common stocks are not fixed dollar investments, they have the opportunity to keep pace with inflation. EEO IS THE LAW . Annuities: How to Find the Right One for You, How a Fixed Annuity Works After Retirement, Pros and Cons of Indexed Universal Life Insurance. Question #45 of 48Question ID: 606795 A)not suitable A guaranteed death benefit guarantees that the beneficiary will receive a death benefit if the annuitant dies before the annuity begins paying benefits. No paper. Many variable annuities invest the separate account in mutual funds. For a nonqualified variable annuity, cost basis for the annuitant would use the after-tax dollars contributed. Spartan Technology Services and Solutions Private Limited is a subsidiary of IBM (International Business Machines) Corporation. Table1. Based only on these facts, the variable annuity recommendation is Which of the following recommendations would best meet the customer profile? A customer has contributed $1,000 a year for 10 years to his tax-deferred nonqualified variable annuity. D) II and III. They offer broad diversification in the securities market and potential growth, all while using the power of tax deferral. ($5,000) to a stock fund. Guaranteed Lifetime Annuity: How They Work, When They Pay You, This is also generally true of retirement plans. C) suitable regardless of funding sources This factor is used to establish the dollar amount of the first annuity payment. B)II and III. D)value of accumulation units. C) annuity units. \hspace{10pt} Federal unemployment (employer only), 0.8%0.8\%0.8%. \hspace{10pt} \text{Warehouse salaries} & 110,000 & \hspace{10pt} \text{Social security tax withheld} & 51,714\\ 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. *A joint life with last survivor contract covers multiple annuitants and ceases payments at the death of the last surviving annuitant. A) periodic payment immediate annuity. 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) It will be higher. D) payments continue until age 70-. B)each annuity unit's value varies with time, but the number of annuity units is fixed. Describe. Variable annuities provide protection from inflation because their monthly income can increase depending on the separate account's performance. A client has purchased a nonqualified variable annuity from a commercial insurance company. A separate account will invest in a number of different securities. When a variable annuity contract is annuitized, the number of annuity units is fixed. For example, when paying rent, the rent payment (PMT) A) Any tax due is deferred. *During the payout period, payments are based on a fixed number of annuity units established when the contract was annuitized. D)an accounting measure used to determine payments to the owner of the variable annuity. Fixed annuities are not considered securities as return is guaranteed by the insurance company issuer. The value of the customer's account is converted into annuity units if and when the customer decides to annuitize the contract. The number of accumulation units can rise during the accumulation period. 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. 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 . A) Ordinary income tax on earnings exceeding basis. The money paid in will be returned tax free, but the earnings portion will be taxed as ordinary income. B) suitable if she has enough equity in the home to fund the variable annuity without cashing out the other VA contract Consequently, the client pays taxes only on the growth portion of the withdrawal ($10,000). national origin, genetics, disability, age, veteran status, or any other characteristic protected by law. The value of a variable annuity is based on the performance of an underlying portfolio of sub accounts selected by the annuity owner. 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. The amount taxed is the amount of the lump-sum payment minus the deceased's cost basis in the investment. However, because the client is not yet age 59- when making the withdrawal, he also pays a 10% penalty, or $1,000. For a retired person, which of the following investments would provide the greatest protection against inflation? *A variable annuity may only be surrendered during the accumulation period. D)the safety of the principal invested. D) I and III. A)value of underlying securities held in the separate account. 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. A) The policy provides a minimum guaranteed death benefit. 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. When the second party dies, all payments cease. B)Tax-free municipal bonds The value of the separate account is now $30,000. A variable annuity is a security and must be registered with the SEC, not FINRA. 10.1 This chapter addresses a number of ABS statistics relating to the economically active population which were not discussed elsewhere. savingsbondsGroupinsurance$198,74451,71415,21030,42045,630$341,718, Tax rates assumed: B) 0. At the end of the year your account has a value of 10750. A)II and III They are also not considered suitable for anyone who anticipates needing a lump sum within a short time frame to fund other endeavors. An annuitant assumes the investment risk of a variable annuity and is not protected by the insurance company from capital losses. A variable annuity is just a tax-deferred annuity in which you get to choose how the value of the annuity is invested. 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. 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. Refinancing a home to draw out equity has been identified by FINRA as an abusive sales tactic regarding the sales of VAs. This recommendation is: A variable annuity is a combination of 2 products: an insurance contract and a mutual fund. A) Fixed Annuity This would not align with the couple's criteria for coverage as long as they both live. 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. C) II and III. C)Mortality risk. D) an accounting measure used to determine the contract owner's interest in the separate account. When the annuitization option is selected, each payment represents both capital and earnings. A)Corporate debt securities Question #11 of 48Question ID: 606816 *The customer, in the accumulation stage of the annuity, is holding accumulation units. U.S. Securities and Exchange Commission. How Good of a Deal Is an Indexed Annuity? The earnings are taxable but the cost basis is returned tax free. B) During the accumulation period. A rider or statement of condition that allows a variable life insured to maintain policy coverage after becoming disabled is a benefit known as Her intent was to use the funds for the down payment on a house after graduation. *Accumulation units represent units of ownership in a life insurance company's separate account when the contract is in the accumulation stage. During the . B)a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero A) number of annuity units. II. B)100% taxable. B)suitable regardless of funding sources A joint life with last survivor annuity: C) III and IV. If your customer invests in a variable annuity and chooses to annuitize at age 65, which of the following statements are TRUE? A)an accounting measure used to determine the contract owner's interest in the separate account. Variable Annuity Advantages and Disadvantages, Guide to Annuities: What They Are, Types, and How They Work. are purchased primarily for their insurance features A) Age 56, available cash to invest, makes the maximum retirement plan contributions to an existing IRA and 401(k) plan A)IPO. When the second party dies, all payments cease. b. Distribution of dividends occurs during the accumulation period. Reference: 12.3.3 in the License Exam. 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. A prospectus for a variable annuity contract: Deferred Annuity Definition, Types, How They Work, What Is a Fixed Annuity? Among annuities, variable annuities differ from fixed annuities, which provide a specific and guaranteed return. B) II and III *Contributions to a nonqualified variable annuity are not tax deductible. What Are the Biggest Disadvantages of Annuities? The investor purchased accumulation units. As the name implies, the investment performance of a variable annuity's portfolio (separate account) can vary, and the investor bears the risk of any potential decline in its value. C) II and IV. D) Variable annuities. A variable annuity's separate account is: A separate account will invest in a number of different securities. D)Variable annuity. The fees on variable annuities can be quite hefty. It is the starting point of motivation because they generate emotions. C)Growth mutual funds c) Construct a contingency table showing all the joint and marginal probabilities. Suggesting that loans or drawing equity from a home to fund VA contracts have also been targeted as abusive sales practices. D)Municipal bonds. 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. a variable annuity does not guarantee an earnings rate of return. A customer has a nonqualified variable annuity. If the customer takes a withdrawal of $10,000, what are the tax consequences? D)I and III. A) I and III. 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. (Check all that apply.) Since , has paid out quarterly dividends ranging from $0.00 to $0.00 per share. A) be paid to a designated beneficiary. Lifetime vs. fixed period annuities *The investor has already paid tax on the contributions but the earnings have grown tax-deferred. Question #46 of 48Question ID: 606796 Contributions to an IRA may be tax deductible, depending on the individual's earnings and participation in a company-sponsored qualified retirement plan. C) number of accumulation units. C) III and IV B) accumulation units. C) The investor's concerns about taxes. 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 number of annuity units is fixed at the time of annuitization. approve changes in the plan portfolio. He wants to ensure that the client, in addition to meeting suitability requirements, is aware of certain variable annuity contract characteristics. 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. When the annuitization option is selected, each payment represents both capital and earnings. 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. II. The number of annuity units rises once annuitization begins. If an investor has a fixed-annuity contract with an insurance company, which of the following risks is assumed by the investor? 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: In a variable annuity contract, the provision that guarantees the annuitant payments for life is called the: A)the state banking commission. variable annuity without paying tax at the time of the transfer. Which Earns More: Variable or Fixed Annuities? vote for the investment adviser. savingsbonds30,420Groupinsurance45,630$341,718\begin{array}{lrlr} A)the number of annuity units becomes fixed when the contract is annuitized. a. C)III and IV. The correct answer was: partially a tax-free return of capital and partially taxable. This role is also eligible for annual short-term incentive compensation. B)changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. His objective is monthly income that he can receive after he retires to supplement his small pension and social security benefits. C) I and III. a variable annuity guarantees payments for life. Travel Times Journal found that the average per person cost of a 10-day trip along the Pacific coast, per person, is $1,015. With variable annuities policyholders can choose from a number of investment opportunities. Carefully look at your options when choosing an annuity. Question #41 of 48Question ID: 606801 In March, the actual net return to the separate account was 8%. Variable annuity salespeople must register with all of the following EXCEPT: Which of the following are defined as securities? The LATF-adopted ILVA Actuarial Guideline has an effective date of July 1, 2024 for contracts, riders or endorsements issued on or after that date. In addition, an element of risk must be present. He originally invested $29,000 4 years ago; it now has a value of $39,000. What Are Ordinary Annuities, and How Do They Work (With Example)? B) Life annuity. Try B)I and II What is her total tax liability? The value of accumulation and annuity units varies with the investment performance of the separate account. However, it does guarantee payments for life (mortality). B)I and III. the SEC. PGIM Fixed Income, a division of PGIM Inc., an SEC-registered investment adviser and a business unit of Prudential Financial, Inc. is seeking a Portfolio Risk Surveillance Analyst. An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are. A)There is no tax as the withdrawal is considered return of capital. Sub accounts and mutual funds are conceptually. B) 10% penalty plus payment of ordinary income tax on all funds withdrawn. B)Two-thirds of the withdrawal is taxable as ordinary income. D) I and IV. An annuity factor is taken from the annuity table, which considers, for example, the investor's sex and age. C)complete all paper work to purchase the annuity contract and obtain the clients signature immediately. Round to the nearest hundredth of a percentile. 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. 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.

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