Contributions to an IRA may be tax deductible, depending on the individual's earnings and participation in a company-sponsored qualified retirement plan. An 18-year-old, unmarried high school student sought a safe investment for a $30,000 bequest until after she graduated from college. B) be paid to any legal heirs as recognized by the annuitant's state of domicile. Inflation-hedging, using both tax deferral combined with market growth potential, is made possible by variable annuities #. D)separate account may consist of mutual funds. C) Tax-free municipal bonds Of the four client profiles below which might be the best suited for a variable annuity recommendation? C)the invested money will be professionally managed according to the issuers' investment objectives. B)Two-thirds of the withdrawal is taxable as ordinary income. In addition, if the customer is not at least 59-, there will be a tax penalty of an additional 10%. You purchase a variable annuity contract by making either a single purchase payment or a series of purchase payments. 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. All of the following investment strategies offer either fully or partially tax-deductible contributions to individuals who meet eligibility requirements EXCEPT: A variable annuity is a type of annuity contract in which the value can vary based on the performance of an u . D) the yield is always higher than mortgage yields. A) A 75 year old women, who is a former executive retired for over ten years who wants to preserve as much capital as she can to leave to her two grandchildren. D) II and III. With regard to a variable annuity, all of the following may vary EXCEPT: An Immediate Annuity is designed to provide each of the following features, EXCEPT: The creation of an estate. a variable annuity does not guarantee payments for life. Which of the following is not a characteristic of a program module? Her agent recommended she choose a variable annuity as a safe haven for the funds. A 32-year-old with a company-sponsored 401k plan who will need a lump sum soon to finance graduate school tuition Since , has paid out quarterly dividends ranging from $0.00 to $0.00 per share. Your 65-year-old client owns a nonqualified variable annuity. B) II and III C) 3000. D) Variable annuities. 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? If you need to withdraw money from the account because of a financial emergency, you may face surrender fees. Based on the information given in the question, the VA recommendation would not be suitable. The number of annuity units rises once annuitization begins. *The most important consideration in purchasing a variable annuity is to be aware that benefit payments will fluctuate with the investment performance of the separate account. A) two people are covered and payments continue until the second death. C)the number of annuity units is fixed, and their value remains fixed. D) tax free. *Of the four customer profiles the individual already making the maximum retirement account contributions available to him and wanting to minimize the tax consequences of being in a high income tax bracket would be most suitable for a VA recommendation. Spartan Technology Services and Solutions Private Limited is a subsidiary of IBM (International Business Machines) Corporation. B)I and III. We also reference original research from other reputable publishers where appropriate. Reference: 12.1.4.1 in the License Exam. 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. B) IPO. C) taxed as ordinary income only to the extent of earnings. 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. Which of the following recommendations would best meet the customer profile? C) There is no tax as the withdrawal is considered return of capital. Classifying annuities There are many categories of annuities. 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. Flashcards - Securities and Tax - FreezingBlue Life Insurance vs. Annuity: What's the Difference? A) There is no risk in a variable annuity. C) such an annuity is designed to combat inflation risk. Based only on these facts, the variable annuity recommendation is 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. If this client is in the payout phase, how would his April payment compare to his March payment? D) It cannot be determined until the April return is calculated. D)Variable annuity. In addition, an element of risk must be present. D) an accounting measure used to determine the contract owner's interest in the separate account. B) The policyowner. A)III and IV. C)A 10% penalty plus the payment of ordinary income tax on all of the funds withdrawn. Question #27 of 48Question ID: 606818 Simple and general annuities problems with solutions The correct answer was: partially a tax-free return of capital and partially taxable. *Accumulation units represent units of ownership in a life insurance company's separate account when the contract is in the accumulation stage. who needs access to the sum invested at later time. \hspace{10pt} Medicare, 1.5%1.5\%1.5% B) The entire $10,000 is taxable as ordinary income. When the contract is annuitized, the annuitant is credited with a fixed number of annuity units. Variable annuities should be considered long-term investments due to the limitations on withdrawals. 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. She may choose to receive monthly payments for the rest of her life. 222. No, annuities are not FDIC-insured as they are not bank products. A) Life-only annuity C)The entire $10,000 is taxable as ordinary income. The owner of a life annuity with 10-year period certain will receive payments for life, subject to a minimum of 10 years. A) Money market fund. B) II and III Post navigation A)II and IV. *Variable annuity contracts were devised to help investors keep pace with inflation. Reference: 12.1.2.1.1 in the License Exam. *The owner of a life annuity with 10-year period certain will receive payments for life, subject to a minimum of 10 years. A rider or statement of condition that allows a variable life insured to maintain policy coverage after becoming disabled is a benefit known as 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. B)Fixed annuity contract with a discussion regarding timing risk A) taxed at a reduced rate. A variable annuity is both an insurance and a securities product. When a variable annuity contract is annuitized, the number of annuity units is fixed. On any device & OS. Listing tax-deferred growth as an objective for retirement income, which of the following investments is most suitable? C) Mutual fund portfolio consisting of blue chip stocks MetLife offers a comprehensive benefits program, including healthcare benefits, life insurance, retirement benefits, parental leave, legal plan services and paid time off. B) During the accumulation period. Vaccine has decreased the incidence. *Funding a VA contract by cashing out either life insurance policies or existing VA contracts, especially those held for a short period of time is not suitable. Though there is no beneficiary designation during the annuitization, this is not an issue for this annuitant. a. Fixed annuities, on the other hand, provide a guaranteed return. Universal variable life policies B)part earnings and part cost basis A) The fact that the annuity payment may increase or decrease. This guideline has been prepared for use by Federal agencies. If an investor has purchased an immediate variable annuity, which of the following statements best describe the investment? But again, the need to designate beneficiaries is not an issue for this annuitant. 5 Q All of the following are characteristics of variable whole life EXCEPT the premium is level there is no guaranteed cash value there is no guaranteed minimum death benefit. A)variable annuities may only be sold by registered representatives. D) I and II. A) changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. A fixed annuity is an insurance contract that pays a guaranteed rate of interest on the owner's contributions and later provides a guaranteed income. Typically, they allow one withdrawal each year during the accumulation phase. B)unsuitable because her situation exposes her to surrender charges and early withdrawal penalties in exchange for insufficient benefits. You can buy an annuity with either a lump sum or a series of payments, and the accounts value will grow accordingly. C) 10 years of variable payments. withdraw funds without any tax consequences. 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. 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. Funding a VA contract by cashing out either life insurance policies or existing VA contracts, especially those held for a short period of time is not suitable. 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 In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. A) complete all paper work to purchase the annuity contract and obtain the clients signature immediately. An annuity factor is taken from the annuity table, which considers, for example, the investor's sex and age. Hire Velocity hiring Customer Escalation Agent in Tampa, Florida Future annuity payments will vary according to the separate account's performance. In March, the actual net return to the separate account was 8%. Question #19 of 48Question ID: 606826 Variable annuities are designed to combat inflation risk. Contributions to a nonqualified variable annuity are not tax deductible. 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. If this client is in the payout phase, how would his April payment compare to his March payment? D)Any tax due is deferred. Consequently, the client pays taxes only on the growth portion of the withdrawal ($10,000). C) III and IV. 6102.0.55.001 - Labour Statistics: Concepts, Sources and Methods, Dec 2005 c) Construct a contingency table showing all the joint and marginal probabilities. A) I and II Which of the following statements regarding variable annuities are TRUE? C) Universal variable life policy. Reference: 12.2.1 in the License Exam. D) 100% tax deferred. 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. b. D)It cannot be determined until the April return is calculated. D)A 10% penalty plus the payment of ordinary income tax on funds withdrawn in excess of the owner's basis. C) III and IV must provide full and fair disclosure. Reference: 12.1.2 in the License Exam, Question #39 of 48Question ID: 721469 D)money market funds. a variable annuity guarantees an earnings rate of return. Question #36 of 48Question ID: 606805 This includes transportation, food, lodging, and entertainment. The annuity unit's value represents a guaranteed return. the agent must be licensed in both insurance and securities. A client has purchased a nonqualified variable annuity from a commercial insurance company. When the second party dies, all payments cease. Simple and general annuities problems with solutions A 45-year-old investor takes a lump-sum distribution from a nonqualified variable annuity. 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. 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 annuity units becomes fixed when the contract is annuitized; it is the value of each unit that fluctuates. a life insurance holder dies sooner than expected. must precede every sales presentation. One of the following would achieve that objective but a suitability discussion regarding it's risk should also occur. Variable annuities involve underlying equity investments in a separate account. D)each annuity unit's value is fixed, but the number of annuity units varies with time. a variable annuity does not guarantee payments for life. The value of the customer's account is converted into annuity units if and when the customer decides to annuitize the contract. Suggesting that loans or drawing equity from a home to fund VA contracts have also been targeted as abusive sales practices. A) Life-only annuity C) value of underlying securities held in the separate account. This recommendation is: D) unsuitable because her situation exposes her to surrender charges and early withdrawal penalties in exchange for insufficient benefits. D)Joint and last survivor annuity. Get the free Learn About Annuities and Their Myths - F&G C) Life annuity with period certain. "Variable Annuities: What You Should Know," Pages 67. I. B) with guaranteed minimum withdrawal benefits (GMWBs) the periodic payments can be monthly, quarterly or annually C)II and IV. B) the safety of the principal invested. The second phase is triggered when the annuity owner asks the insurer to start the flow of income, often referred to as the payout phase. All of the following statements about variable annuities are true EXCEPT: If you die before the payout phase, your beneficiaries may receive a. B) accumulation units. Before the contract is annuitized, your client, currently age 60, withdraws some funds for personal purposes. ($5,000) to a stock fund. Chapter 4: Annuities Flashcards | Chegg.com A) I and III. savingsbonds30,420Groupinsurance45,630$341,718\begin{array}{lrlr} No software installation. II. In March, the actual net return to the separate account was 8%. PDF Variable Annuities: What You Should Know - SEC D) I and III. A variable annuity is a combination of 2 products: an insurance contract and a mutual fund. B)each annuity unit's value varies with time, but the number of annuity units is fixed. C. Only variable annuities have payout plans that provide the client income for life. 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 A)defined contribution plans. Variable annuities gave buyers a chance to benefit from rising markets by investing in a menu of mutual funds offered by the insurer. 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. C) with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed Your 65-year-old client owns a nonqualified variable annuity. C) II and IV. Question #28 of 48Question ID: 606821 C)3800. When a variable annuity contract is annuitized, the number of annuity units is fixed. Your client has a large sum of money to invest from the proceeds of the sale of his home. Assuming that the payroll for the last week of the year is to be paid on December 313131, journalize the following entries: An investor who purchases a fixed annuity contract assumes purchasing-power risk. B)Value of each annuity unit each month. Similarly, CDs are insured, thereby eliminating risk and guaranteeing a return. Sample problems from Chapter 9. . A) Only during the payout period. C) suggest to the client that perhaps a loan or refinancing his vacation home might be a better way to fund the contract purchase. Try D) I and III Usually the term "annuity" relates to a contract between an individual and a life insurance company. On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity).