A)variable annuities may only be sold by registered representatives. A) Ordinary income tax on earnings exceeding basis. For a nonqualified variable annuity, cost basis for the annuitant would use the after-tax dollars contributed. Registration with FINRA is de facto registration with the SEC; no registration is required by the state banking commission. B) variable annuities. Once a variable annuity has been annuitized: B) IPO. A) I and II. Question #37 of 48Question ID: 606817 When a partial withdrawal is made from an annuity, the earnings are considered to be taken out first for tax purposes (or LIFO). An accumulation unit in a variable annuity contract is: A 10% penalty applies only if distributions begin before age 59-. B) accumulation units. She may choose to receive monthly payments for the rest of her life. They can be classified by: Nature of the underlying investment - fixed or variable *Mortality risk- If an annuitant lives longer than expected, the insurance company will have to continue payments longer than expected. How to Navigate Market Volatility While Saving for Retirement, Variable Annuity: Definition and How It Works, Vs. The return on a variable annuity is not guaranteed; it is determined by the underlying portfolio's value. B) taxed as ordinary income. D)an accounting measure used to determine payments to the owner of the variable annuity. D) minimum guaranteed death benefit. C)not suitable because a lifetime income rider is only for someone who is already retired You can tailor the income stream to suit your needs. D) I and IV. 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 . Your 65-year-old client owns a nonqualified variable annuity. A) not suitable Fixed annuities, on the other hand, provide a guaranteed return. C)with guaranteed minimum withdrawal benefits (GMWBs) the periodic payments can be monthly, quarterly or annually Ideally they should be funded with readily available cash rather than using funds liquidated from existing investments. He wants to ensure that the client, in addition to meeting suitability requirements, is aware of certain variable annuity contract characteristics. An Immediate Annuity is designed to provide each of the following features, EXCEPT: The creation of an estate. \hspace{10pt} Medicare, 1.5%1.5\%1.5% A) I and III. Practice all cards. A guaranteed lifetime annuity promises to pay the owner an income for the rest of their life. You have 4 clients each expressing interest in a variable annuity contract. IV. D)Municipal bonds. Job Classification: Corporate - Legal and Compliance. C) The insurance company. Reference: 12.1.2.1.1. in the License Exam. Suppose that 20%20 \%20% of their users are United States users who log on daily. Policyholders . Refinancing a home to draw out equity has been identified by FINRA as an abusive sales tactic regarding the sales of VAs. The number of variable annuity accumulation units can rise during the accumulation period when additional units are being purchased. B)IRAs. He makes the following four statements, all of which are true EXCEPT A) be paid to a designated beneficiary. D) value of accumulation units. The value of the annuity units is fixed. With a fixed annuity, by contrast, the insurance company assumes the risk of delivering whatever return it has promised. 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. This makes a total of $4,000 tax and penalty paid on the random withdrawal. A) It will be higher. *The minimum guaranteed death benefit is provided by that portion of the payment invested in the insurance company's general account. B) Age 78, retired for 20 years, lives comfortably and wants to leave all liquid assets to children However, a discussion should occur regarding the risks that are associated with a fixed annuity; purchasing power risk. D)Investment risk. used for the investment of funds paid by contract holders. D) I and III Once the cost basis is reached, any further withdrawals are a nontaxable return of principal. You can learn more about the standards we follow in producing accurate, unbiased content in our. What Are Ordinary Annuities, and How Do They Work (With Example)? There is a guaranteed minimum interest rate, normally amounting to between 1 and 3 percent. B)Tax-free municipal bonds U.S. Securities and Exchange Commission. A)Purchasing power risk. 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. However, at the end of the period certain the payments to the named beneficiary (the spouse) will stop. D)an accounting measure used to determine payments to the owner of the variable annuity. Licensed to sell Variable Annuities in the following state(s): FL, TX . An annuity is an insurance product that promises to pay out income at a future date based on invested funds. In March, the actual net return to the separate account was 8%. A prospectus for a variable annuity contract: B) I and III. In a variable annuity contract, the provision that guarantees the annuitant payments for life is called the: D)Variable annuity. Immediate annuities purchase annuity units directly. *A variable annuity is a security and must be registered with the SEC, not FINRA. B) I and IV. Do homework Doing homework can help you learn and understand the material covered in class. The remainder of the premium is invested in the separate account. Reference: 12.1.1 in the License Exam. Question #22 of 48Question ID: 606803 D)It cannot be determined until the April return is calculated. A) Life-only annuity Any withdrawals you make prior to the age of 59 may also be subject to a 10% tax penalty. A)There is no tax as the withdrawal is considered return of capital. Annuities: How to Find the Right One for You, How a Fixed Annuity Works After Retirement, Pros and Cons of Indexed Universal Life Insurance. Fixed annuities pay a fixed monthly benefit which loses purchasing power if there is inflation. 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. Life Insurance vs. Annuity: What's the Difference? B)FINRA. A) two people are covered and payments continue until the second death. B) Life annuity. B) II and III While a variable annuity has the benefit of tax-deferred growth, its annual expenses are likely to be much higher than the expenses of a typical mutual fund. A) waiver of premium required to be located off of the company's premises. Complete a blank sample electronically to save yourself time and money. 's dividend yield was % last year. Universal variable life policies The earnings on dollars invested into a variable annuity accumulate tax deferred, which is why variable annuities are popular products for retirement accumulation. Sample problems from Chapter 9 . C) Tax-free municipal bonds 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 Reference: 12.3.2.1 in the License Exam. B) Life annuity. C)suitable due to the death benefit features of a variable annuity. D)suggest to the client that perhaps a loan or refinancing his vacation home might be a better way to fund the contract purchase. C) each annuity unit's value and the number of annuity units vary with time. Round to the nearest hundredth of a percentile. B)fixed in value until the holder retires. The amount taxed is the amount of the lump-sum payment minus the deceased's cost basis in the investment. D) I and IV. Deal with mathematic Math is all about solving equations and finding the right answer. Annuities are similar to other forms of investing in that the owner invests money with the hope that it will gain in value, but annuities also come with higher fees than most mutual funds. This guideline has been prepared for use by Federal agencies. && \hspace{10pt}\text{Group insurance} & \underline{45,630}\\ 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. The accumulation unit's value is used to calculate the total value of the account. variable annuity without paying tax at the time of the transfer. An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are. Final answer. At the end of the year your account has a value of 10750. CDs insured by the FDIC. D)accumulation units. A) Life-only annuity 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 Diagnosis is made by punch biopsy. A) II and IV. A variable annuity is just a tax-deferred annuity in which you get to choose how the value of the annuity is invested. As part of the registration requirements, a prospectus must be filed and distributed to prospective investors. Distribution can take place before or during any solicitation for sale. Fixed Annuity: A fixed annuity is a type of annuity contract that allows for the accumulation of capital on a tax-deferred basis. C) insurance companies keep variable annuity funds in separate accounts from other insurance products. A rider or statement of condition that allows a variable life insured to maintain policy coverage after becoming disabled is a benefit known as Which is it? Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Claudia Bienias Gilbertson, Debra Gentene, Mark W Lehman, Eric W. Noreen, Peter C. Brewer, Ray H Garrison. An investor who purchases a fixed annuity contract assumes purchasing-power risk. IBM is a global brand and has its presence in 170 countries and operates . For an investor, which of the following is the most important factor in determining the suitability of a variable annuity investment? Reference: 12.1.4.1 in the License Exam. An annuity payment is the dollar amount of the equal periodic payment in an annuity environment. 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. An individual who purchases a Life annuity is given protection against: the risk of living longer than expected The type of annuity that can be purchased with one monetary deposit is called a (n) Immediate annuity N purchases an annuity by making payments in an amount no less than $100 quarterly. Describe. C) I and III. Once the cost basis is reached, any further withdrawals are a nontaxable return of principal. EEO IS THE LAW . B)II and III. D) a variable annuity contract is subject to fluctuating values due to market fluctuations of the underlying separate accounts. C) none of these. Upon John's death during the accumulation period, Sue takes a lump-sum payment. The amount of the purchase payments that go into the account may be less than you paid because fees were taken out of the purchase payments. What type of annuity has a cash value that is based upon the performance of it's underlying investment funds? B) single payment deferred annuity. D) Capital gains tax on earnings exceeding basis. A) Age 56, available cash to invest, makes the maximum retirement plan contributions to an existing IRA and 401(k) plan An investor owning which of the following variable annuity contracts would hold accumulation units? Annual depreciation on the machine is$12,000, and the tax rate of the company is 25%. B)fixed in value until the holder retires. A)variable annuities will protect an investor against capital loss. Reference: 12.1.1 in the License Exam. 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. A)100% tax free. the SEC. The value of the separate account is now $30,000. If an investor has a fixed-annuity contract with an insurance company, which of the following risks is assumed by the investor? C) such an annuity is designed to combat inflation risk. A)number of annuity units. He earned the Chartered Financial Consultant designation for advanced financial planning, the Chartered Life Underwriter designation for advanced insurance specialization, the Accredited Financial Counselor for Financial Counseling and both the Retirement Income Certified Professional, and Certified Retirement Counselor designations for advance retirement planning. \end{array} Investopedia requires writers to use primary sources to support their work. If an investor has purchased an immediate variable annuity, which of the following statements best describe the investment? A customer has contributed $1,000 a year for 10 years to his tax-deferred nonqualified variable annuity.

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