A. C) insurance guarantee. Which of the following statements regarding variable annuities are TRUE? For example, when paying rent, the rent payment (PMT) A variable annuity does not guarantee an earnings rate because earnings will depend on the performance of the separate account. Who assumes the investment risk in a variable annuity contract? A guaranteed lifetime annuity promises to pay the owner an income for the rest of their life. D) reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. C)the SEC. The separate account performance compared to an assumed interest rate. A) A variable annuity The $30,000 contract value represents $10,000 of contributions and $20,000 of earnings. CH 7 Annuities Flashcards | Quizlet Question #12 of 48Question ID: 606814 You have 4 clients each expressing interest in a variable annuity contract. c. The separate account provides for a guaranteed minimum return. 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: A) complete all paper work to purchase the annuity contract and obtain the clients signature immediately. Reference: 12.3.3 in the License Exam. 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. A) I and IV. 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. Vaccine has decreased the incidence. B) I and II. must precede every sales presentation. Question #27 of 48Question ID: 606818 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. C) 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. He originally invested $29,000 4 years ago; it now has a value of $39,000. A rider or statement of condition that allows a variable life insured to maintain policy coverage after becoming disabled is a benefit known as Bear in mind that between the numerous feessuch as investment management fees,mortality fees, and administrative feesand charges for any additional riders, a variable annuitysexpenses can quickly add up. Reference: 12.1.2 in the License Exam. In a variable life annuity with 10-year period certain, a contract holder receives: *Under the mortality guarantee, the insurance company assumes mortality risk by guaranteeing payments for life, though the amount of each payment is not guaranteed. 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. Annuities due are a type of annuity where payments are made at the beginning of each payment period. Your customer in his early 30s has received a modest inheritance from a relative. 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. The correct answer was: partially a tax-free return of capital and partially taxable. The fees on variable annuities can be quite hefty. 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. must be filed with FINRA. Therefore only a fixed annuity could be considered as suitable. Reference: 12.2.1 in the License Exam, Question #48 of 48Question ID: 606835 C) The ordinary income on the proceeds over the cost basis plus 10% of the net gain (if any) if Sue is younger than 59- years old. 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. D) I and III. Ideally they should be funded with readily available cash rather than using funds liquidated from existing investments. *Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. In March, the actual net return to the separate account was 8%. MetLife offers a comprehensive benefits program, including healthcare benefits, life insurance, retirement benefits, parental leave, legal plan services and paid time off. covers more than one person. B) Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. D) Variable Annuity. If an investor has purchased an immediate variable annuity, which of the following statements best describe the investment? The most popular type of variable annuity is a deferred annuity. Home; About. The minimum guaranteed death benefit is provided by that portion of the payment invested in the insurance company's general account. B) fixed in value until the holder retires. Which of the following is characteristic of variable annuities? All of the following characteristics are shared by both a mutual fund and a variable annuity's separate account EXCEPT: D)II and III. Her intent was to use the funds for the down payment on a house after graduation. D)A variable annuity, Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. A customer is receiving annuitized payments from a variable annuity. 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. GuranteedExamLife Flashcards by Gabriel Martinez | Brainscape B) During the accumulation period. An annuity is an insurance product that promises to pay out income at a future date based on invested funds. This describes which of the following annuities? This factor is used to establish the dollar amount of the first annuity payment. C) each annuity unit's value and the number of annuity units vary with time. A) waiver of premium A the safety of the principal invested B the yield is always higher than bond yields. C)Mortality risk. \end{array} 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 return on a variable annuity is not guaranteed; it is determined by the underlying portfolio's value. The growth portion is taxed as ordinary income. C) II and III. B) Exchange traded Funds (ETFs) or Exchange traded Notes (ETNs) regulated under both securities and insurance laws. D) I and II. An accumulation unit in a variable annuity contract is: *Only variable annuities have payout plans that provide the client income for life. All of the following are accurate statements to make to the client EXCEPT As part of the registration requirements, a prospectus must be filed and distributed to prospective investors. Your client owns a variable annuity contract with an AIR of 4%. A) Any tax due is deferred. The annuitant may not contribute and withdraw simultaneously. You can tailor the income stream to suit your needs. B) IPO. C) value of underlying securities held in the separate account. D)I and II. $63,000 b.$51,000 c. $18,000 d.$6,000. Typically, they allow one withdrawal each year during the accumulation phase. 222. Fixed annuities, on the other hand, provide a guaranteed return. The creation of an estate. 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 When a partial withdrawal is made from an annuity, the earnings are considered to be taken out first for tax purposes (or LIFO). Francisco R. - Financial Professional - Prudential Financial | LinkedIn That can adversely affect your returns over the long term, compared with other types of investments. Sample problems from Chapter 9 . The tax on this is $2,800 ($10,000 x 28%). Suggesting that loans or drawing equity from a home to fund VA contracts have also been targeted as abusive sales practices. For example, when paying rent, the rent payment (PMT) . *Waiver of premium is a benefit available on qualified life insurance contracts, usually in the form of a rider, which provides for the waiver of premium payments that fall due while the policyholder is totally disabled. 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)Joint tenants annuity. A)the yield is always higher than mortgage yields. used to escrow late or otherwise delinquent premium payments. 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. C) III and IV. Question #14 of 48Question ID: 606823 A) I and IV. Annuities due are a type of annuity where payments are made at the beginning of each payment period. A)Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. They are also riddled with fees, which can cut into profits. C)the yield is always higher than bond yields. 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. B) Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. He originally invested $29,000 4 years ago; it now has a value of $39,000. C)such an annuity is designed to combat inflation risk. If the customer takes a withdrawal of $10,000, what are the tax consequences? Do homework Doing homework can help you learn and understand the material covered in class. This makes a total of $4,000 tax and penalty paid on the random withdrawal. Sample problems from Chapter 9. . C)insurance companies keep variable annuity funds in separate accounts from other insurance products. Which of the following are defined as securities? 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. D)Investment risk. D) the payout plans provide the client income for life. a life insurance holder lives longer than expected. Of the four client profiles below which might be the best suited for a variable annuity recommendation? *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. Immediate life annuity with 10-year period certain. Based on the information given in the question, the VA recommendation would not be suitable. An immediate annuity is designed to pay an income one time-period after the immediate annuity is bought. Each of the remaining statements are true. B)mutual fund units. Chapter 6-Classification Annuities Flashcards | Quizlet D) each annuity unit's value varies with time, but the number of annuity units is fixed. Many variable annuities invest the separate account in mutual funds. On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity). The value of the separate account is now $30,000. B)reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. Question #37 of 48Question ID: 606817 Both products typically have a wide range of options across equities, bonds and money market instruments. A registered representative explaining variable annuities to a customer would be CORRECT in stating that: Herpes Zoster has all of the following characteristics except: Group of answer choices. Because this is not guaranteed, the policyowner bears the investment risk. Distributions from such an annuity are computed on a LIFO basis with the income taxed first. *The minimum guaranteed death benefit is provided by that portion of the payment invested in the insurance company's general account. D) cost of living. Question #46 of 48Question ID: 606796 A)number of annuity units. A) partially a tax-free return of capital and partially taxable. FINRA. Question #35 of 48Question ID: 606810 In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. C)annuity units. required to be located off of the company's premises. variable annuity without paying tax at the time of the transfer. D) reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. Variable annuities operate in similar ways to . Variable annuity salespeople must register with all of the following EXCEPT: Which of the following are defined as securities? A variable annuity is a long term investment issued by an insurance company that can help you grow your money, take income in retirement and pass on your wealth. \hspace{7pt} b. December 303030, to record the employers payroll taxes on the payroll to be paid on December 313131. A) Age 56, available cash to invest, makes the maximum retirement plan contributions to an existing IRA and 401(k) plan The earnings are taxable but the cost basis is returned tax free. 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. No paper. What is the annual cash flow generated from the new machine? The accumulation unit's value is used to calculate the total value of the account. C)Growth mutual funds The tax on this is $2,800 ($10,000 x 28%). C) with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed Chapter 12 - Variable Annuities Flashcards | Chegg.com Annuity death benefits are generally paid in a lump sum. A) mortality guarantee. 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 Fixed interest rates during the payout period The value of each accumulation unit varies: Daily Variable annuities have Variable interest rates and benefits All of the following statements are true regarding the interest rate guarantees of fixed annuities, EXCEPT: B) 0. It's somewhat similar to a variable life insurance policy in that: You can choose how the product's value is invested. D)Joint and last survivor annuity. Question #25 of 48Question ID: 606819 D)variable annuities offer the investor protection against capital loss. Question #31 of 48Question ID: 606836 Which of the following statements regarding variable annuities are TRUE? PDF The NIST definition of cloud computing A)an accounting measure used to determine the contract owner's interest in the separate account. can be sold by someone with only an insurance license CDs insured by the FDIC. Your client owns a variable annuity contract with an AIR of 4%. Carefully look at your options when choosing an annuity. *A variable annuity does not guarantee an earnings rate because earnings will depend on the performance of the separate account. 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. D) each annuity unit's value varies with time, but the number of annuity units is fixed. However, it does guarantee payments for life (mortality). B) During the accumulation period. A joint life with last survivor contract covers multiple annuitants and ceases payments at the death of the last surviving annuitant. C) annuity units. How to Navigate Market Volatility While Saving for Retirement, Variable Annuity: Definition and How It Works, Vs. Periodic payment deferred annuity. A) 4000. C) The investor's concerns about taxes. B) payments continue until the death of the primary owner. B) taxed as ordinary income. What is her total tax liability? The value of the separate account is now $30,000. C) Corporate bonds. A trend makes considerable influence or impact. a variable annuity guarantees an earnings rate of return. C) Universal variable life policy. C)It will be higher. The earnings on dollars invested into a variable annuity accumulate tax deferred, which is why variable annuities are popular products for retirement accumulation. As part of the registration requirements, a prospectus must be filed and distributed to prospective investors. If your 60-year-old customer purchases a nonqualified variable annuity and withdraws some of her funds before the contract is annuitized, what are the consequences of this action? (primary needs). Of the total payroll for the last week of the year, $30,000\$30,000$30,000 is subject to unemployment compensation taxes. C) the client assumes the investment risk. D) II and III. When money is deposited into the annuity, it is purchasing accumulation units. Variable annuity salespeople must register with all of the following EXCEPT:
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