Question #33 of 48Question ID: 606832 Variable Annuities. 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. \hspace{10pt} Federal unemployment (employer only), 0.8%0.8\%0.8%. *The number of variable annuity accumulation units can rise during the accumulation period when additional units are being purchased. B)fixed in value until the holder retires. 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. It's somewhat similar to a variable life insurance policy in that: You can choose how the product's value is invested. You purchase a variable annuity contract by making either a single purchase payment or a series of purchase payments. The following changes have been incorporated into Special Publication 800145, as of the date indicated - . The entire amount is taxed as ordinary income. The company's well-known Rock symbol is an icon of strength, stability, expertise and innovation that has stood the test of time. D)the safety of the principal invested. 222. A) I and III. A) I and IV. *VAs are less suitable for individuals who have not yet made maximum contributions to other retirement accounts such as IRAs and 401ks. B) the safety of the principal invested. 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. When the annuitization option is selected, each payment represents both capital and earnings. Surrender fees and penalties for early withdrawal. Variable annuity salespeople must register with all of the following EXCEPT: A) FINRA. The time period depends on how often the income is to be paid. C) Corporate bonds. Reference: 12.1.1 in the License Exam. 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? About Us Immediate life annuity. C)3800. Which of the following statements regarding variable annuities are TRUE? B) accumulation units. C) be returned to the separate account. . D) I and IV. C) II and III. B)changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. *During the accumulation phase, the number of accumulation units will increase as additional money is invested. B) accumulation units. The separate account performance compared to last month's performance. 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. 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. A)It will stay the same. Based only on these facts, the variable annuity recommendation is *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. A)Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. A) The entire amount is taxed as ordinary income, because it is not life insurance. D) Any time before the accumulation period. (The exception is the fixed income annuity, which has a moderate to high payout that rises as the annuitant ages). IV. Universal variable life policies D) It cannot be determined until the April return is calculated. 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. The growth portion is taxed as a capital gain. B) with guaranteed minimum withdrawal benefits (GMWBs) the periodic payments can be monthly, quarterly or annually However, because the client is not yet age 59- when making the withdrawal, he also pays a 10% penalty, or $1,000. II. The accumulation unit's value is used to calculate the total value of the account. B) variable annuities are classified as insurance products. 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. The growth portion is taxed as a capital gain. Your customer in his early 30s has received a modest inheritance from a relative. All of the following are true about annuities EXCEPT: they have all the same characteristics as life insurance. If the owner of a variable annuity dies during the accumulation period, any death benefit will: The most suitable option and one considered effective for married couples is a single joint and last survivor contract. C)none of these. is required by the Securities Act of 1933. *The return on a variable annuity is not guaranteed; it is determined by the underlying portfolio's value. The payout of an annuitized variable annuity account changes from month to month in a manner determined by which of the following? Annuities are complicated products, so that may be easier said than done. B)I and II D) III and IV. Which is it? B)cost of living. An 18-year-old, unmarried high school student sought a safe investment for a $30,000 bequest until after she graduated from college. D)the rate of return is determined by the underlying portfolio's value. An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are. An Immediate Annuity is designed to provide each of the following features, EXCEPT: The creation of an estate. She may choose to receive monthly payments for the rest of her life. 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. A joint life with last survivor contract covers multiple annuitants and ceases payments at the death of the last surviving annuitant. In addition, an element of risk must be present. This cloud model is composed of five essential characteristics, three service models, and four deployment models. D) II and IV. Variable annuity salespeople must be registered with FINRA and the state insurance department. A variable annuity is a security and must be registered with the SEC, not FINRA. In March, the actual net return to the separate account was 8%. B) II and III The owner of a life annuity with 10-year period certain will receive payments for life, subject to a minimum of 10 years. Reference: 12.1.4.2 in the License Exam. Drives - are hardwired characteristics of the brain that correct deficiencies or maintain an internal equilibrium by producing emotions to energize individuals. An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are. Based on the clients profile which of the following would be the best recommendation? Premiums made into the annuity purchase accumulation units. *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. D) Keogh plans. This factor is used to establish the dollar amount of the first annuity payment. However, they are protected by state guaranty associations in the event that the insurance company providing the product goes out of business. D) I and IV B) The death benefit cannot ever be more than the guaranteed benefit. For an insurance company, mortality risk turns out unfavorably if: *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. For example, if the income is monthly, the first payment comes one month after the immediate annuity is bought. B)suitable regardless of funding sources A) mutual fund units. 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. Vaccine has decreased the incidence. A)II and IV. B)Variable annuities. D) the yield is always higher than mortgage yields. C) Tax-free municipal bonds Practice all cards. B) the state insurance department. B)a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero D) I and III. Contributions to a nonqualified variable annuity are not tax deductible. 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. C) the yield is always higher than bond yields. The features of variable deferred annuities are many. A)II and IV. If this client is in the payout phase, how would his April payment compare to his March payment? B) Life annuity. Variable annuities were introduced in the 1950s as an alternative to fixed annuities, which offer a guaranteedbut often lowpayout during the annuitization phase. Random withdrawals do not guarantee how long the money will last because large withdrawals can deplete the funds before the annuitant dies. If one purchases an annuity for a set price, the issuing company would invest the funds and hold them until they are supposed to be disbursed, generally based on the owner's age. B) During the accumulation period. Variable annuities offer the possibility of higher returns and greater income than fixed annuities, but theres also a risk that the account will fall in value. When a partial withdrawal is made from an annuity, the earnings are considered to be taken out first for tax purposes (or LIFO). While variable annuities have greater potential for earnings, since their interest rate rises and falls with their underlying investments, they can lose money. The value of the separate account is now $30,000. C) with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed The offers that appear in this table are from partnerships from which Investopedia receives compensation. B. Reference: 12.3.3 in the License Exam. A) be paid to a designated beneficiary. A customer has an investment objective of keeping pace with inflation while assuming moderate risk. Your client owns a variable annuity contract with an AIR of 4%. B) Age 78, retired for 20 years, lives comfortably and wants to leave all liquid assets to children 6102..55.001) is being updated on an ongoing basis. A) variable annuities offer the investor protection against capital loss. Which of the following recommendations would best meet the customer profile? C)III and IV. A variable annuity is a combination of 2 products: an insurance contract and a mutual fund. Distribution can take place before or during any solicitation for sale. A) Life-only annuity D) a minimum of 10 years of variable payments, followed by additional variable payments for life. D) 4500. A) There is no risk in a variable annuity. This makes a total of $4,000 tax and penalty paid on the random withdrawal. (Check all that apply.) B) fixed payments for 10 years, followed by variable payments for life. For this potential advantage, the investor, rather than the insurance company, assumes the investment risk. B) Corporate debt securities C)Mortality risk. A)100% tax free. The number of annuity units rises once annuitization begins. A) Age 56, available cash to invest, makes the maximum retirement plan contributions to an existing IRA and 401(k) plan 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. B) payments continue until the death of the primary owner. While there is no guarantee on how investments in the separate account will perform, depending on its investment performance, the separate account could provide for a larger death benefit than the minimum guaranteed amount. This role is also eligible for annual short-term incentive compensation. D) I and II. Each of the remaining statements are true. IV. 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. And, unlike a fixed annuity, variable annuities do not provide any guarantee that you will earn a return on your investment. C)A 10% penalty plus the payment of ordinary income tax on all of the funds withdrawn. *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. Question #13 of 48Question ID: 606822 A variable annuity is a type of annuity contract in which the value can vary based on the performance of an u . the agent must be licensed in both insurance and securities. This chapter was updated on 15 December, 2005. 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. With regard to a variable annuity, all of the following may vary EXCEPT: However, the web version (cat. *Universal variable life policies are insurance company products that should be purchased primarily for the insurance features they offer rather than as an investment. Complete a blank sample electronically to save yourself time and money. All of the following investment strategies offer either fully or partially tax-deductible contributions to individuals who meet eligibility requirements EXCEPT: A) III and IV. 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. When a variable annuity contract is annuitized, the number of annuity units is fixed. D) reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. Only variable annuities have payout plans that provide the client income for life. 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. 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. 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. The most popular type of variable annuity is a deferred annuity. C) single payment immediate annuity. savingsbonds30,420Groupinsurance45,630$341,718\begin{array}{lrlr} 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. A) 2800. 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. A)Corporate debt securities B)I and III. vote for the investment adviser. Both products typically have a wide range of options across equities, bonds and money market instruments. Essential Characteristics: A 10% penalty applies only if distributions begin before age 59-. Based on this information the RR should: A) a minimum rate of return is guaranteed. Variable annuities are riskier than fixed annuities because the underlying investments may lose value. The annuitized payments are viewed for tax purposes as *Variable annuity contracts were devised to help investors keep pace with inflation. the SEC. B) fixed in value until the holder retires. d) What is the probability that a user is from the United States, given that he or she logs on every day? C)prime rate. C) II and IV Securely download your document with other editable templates, any time, with PDFfiller. Her agent recommended she choose a variable annuity as a safe haven for the funds. Which Earns More: Variable or Fixed Annuities? When the contract is annuitized, the annuitant is credited with a fixed number of annuity units. Fixed Annuity, Retirement Annuities: Know the Pros and Cons. Supplemental income stream for retirement, not preservation of capital should be the catalyst to consider a VA and for anyone who may need access to the sum invested for any reason a VA would not be considered a suitable recommendation. \hspace{10pt} Medicare, 1.5%1.5\%1.5% D)variable annuities. B)part earnings and part cost basis 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. A) periodic payment immediate annuity. Home; About. D) accumulation shares. Listing tax-deferred growth as an objective for retirement income, which of the following investments is most suitable? D) an accounting measure used to determine the contract owner's interest in the separate account. Question #35 of 48Question ID: 606810 An annuity factor is taken from the annuity table, which considers, for example, the investor's sex and age. The number of variable annuity accumulation units can rise during the accumulation period when additional units are being purchased. Since the client is older than 59 at the time of distribution, the additional 10% penalty tax is not incurred. The remainder of the premium is invested in the separate account. D)A variable annuity, Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. A) I and II A) I and II Once the contract is annuitized, monthly payments to the customer are: B)4200. 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. A variable annuity's separate account is: A separate account will invest in a number of different securities. The correct answer was: partially a tax-free return of capital and partially taxable. Your client owns a variable annuity contract with an AIR of 4%. D)partially a tax-free return of capital and partially taxable. A) 4000. 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. externalities. Policyholders . An important basic characteristic of common stocks that makes them a suitable type of investment for the separate account of variable annuities is: C)III and IV When the first party dies, the annuity payment is made to the survivor. This factor is used to establish the dollar amount of the first annuity payment. *The investor has already paid tax on the contributions but the earnings have grown tax-deferred. 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. (primary needs). III) A hierarchy of corporate staff evaluates divisions' plans and performance. A customer has an investment objective of keeping pace with inflation while assuming moderate risk. A prospectus for a variable annuity contract: A customer has contributed $1,000 a year for 10 years to his tax-deferred nonqualified variable annuity. A)exempt from taxes 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. A)I and IV. She will receive the annuity's entire value in a lump-sum payment. The work environment characteristics are normal office conditions. D)variable annuities offer the investor protection against capital loss. You can tailor the income stream to suit your needs. Reference: 12.3.1 in the License Exam, Question #30 of 48Question ID: 606833 Based only on these facts, the variable annuity recommendation is Periodic payments are not a consideration because normally the payments into an annuity are level or in a lump sum. Fixed income instruments, like bonds and fixed annuities, are subject to purchasing power risk. D) an accounting measure used to determine the contract owner's interest in the separate account. D) value of accumulation units. C) insurance companies keep variable annuity funds in separate accounts from other insurance products. Of the four client profiles below which might be the best suited for a variable annuity recommendation? the state banking commission. 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 . B) Life annuity with period certain Withdrawals from a nonqualified variable annuity are made on a LIFO basis, so the taxable earnings are considered taken out before principal. Lifetime vs. fixed period annuities U.S. Securities and Exchange Commission. A)IPO. D)II and III. Reference: 12.3.1 in the License Exam. What will this transaction provide? Variable annuities provide protection from inflation because their monthly income can increase depending on the separate account's performance. U.S. Securities and Exchange Commission. Refinancing a home to draw out equity has been identified by FINRA as an abusive sales tactic regarding the sales of VAs. In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. Because common stocks are not fixed dollar investments, they have the opportunity to keep pace with inflation. D) each annuity unit's value varies with time, but the number of annuity units is fixed. Since the client is older than 59 at the time of distribution, the additional 10% penalty tax is not incurred. You can learn more about the standards we follow in producing accurate, unbiased content in our. Reference: 12.1.4 in the License Exam. Often used for retirement planning purposes, it is meant to provide a regular (monthly, quarterly, annual) income stream, starting at some point in the future. For a retired person, which of the following investments would provide the greatest protection against inflation? A) mortality guarantee. B) IPO. A) waiver of premium The income was deferred from tax over the plan's life, so it is taxable as ordinary income once distributed. B) II and IV. The tax on this is $2,800 ($10,000 x 28%). 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. D)suitable if she has enough equity in the home to fund the variable annuity without cashing out the other VA contract, Based on the information given in the question, the VA recommendation would not be suitable. Reference: 12.2.1 in the License Exam. Of the answer choices given the best would be to reevaluate the recommendation based on the new information tendered by the client. Each of the remaining statements are true. Variable annuities are designed to combat inflation risk. III. 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. A)II and III. Spartan Technology Services and Solutions Private Limited is a subsidiary of IBM (International Business Machines) Corporation. If the customer takes a withdrawal of $10,000, what are the tax consequences? C) 3000. D) be paid to the issuing company to complete the plan. D)A 10% penalty plus the payment of ordinary income tax on funds withdrawn in excess of the owner's basis. An accumulation unit in a variable annuity contract is: This guideline has been prepared for use by Federal agencies. 8 annuities provide a guaranteed rate of return, whereas annuities provide conservative to aggressive investments whose rates of return are not guaranteed. D)II and III. 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 dissolutions of the trust for distributing income and capital gains. Once annuitized, the number of annuity units does not vary. A) 2800. Question #17 of 48Question ID: 606802 B) life income B)Value of each annuity unit each month. C) 10% penalty plus payment of ordinary income tax on all funds withdrawn exceeding basis. Distribution can take place before or during any solicitation for sale. An 18-year-old, unmarried high school student sought a safe investment for a $30,000 bequest until after she graduated from college. In deciding whether to put money into a variable annuity versus some other type of investment, its worth weighing these pros and cons. A) the investment portfolio is managed professionally. C) value of underlying securities held in the separate account. Question #38 of 48Question ID: 606798 do not have a separate account B) 10% penalty plus payment of ordinary income tax on all funds withdrawn. A) The policy provides a minimum guaranteed death benefit. A) I and II. If the contract holder dies before the period expires, the remaining payments are made to the beneficiary. C)number of accumulation units. C) There is no tax as the withdrawal is considered return of capital. The client's investment objectives, tax bracket, investment experience and risk tolerance all align well with a VA recommendation. DR:BASSANT ADEL 9 QUIZ CH 6 Choose the correct answer: 1-Insurance policy benefits are classified on an insurance company's balance sheet as A. liabilities, because the insurance company may have to pay out the benefits B. assets, because policy benefits are valuable to the company C. liabilities, because customers may fall behind on their premium payments D. assets, because policy benefits . Assuming that the payroll for the last week of the year is to be paid on January 444 of the following fiscal year, journalize the following entries: *A periodic payment immediate annuity is a contradiction in terms. D)II and IV. Since , has paid out quarterly dividends ranging from $0.00 to $0.00 per share. During payout, distributions will fluctuate due to performance in the separate account. *Under the mortality guarantee, the insurance company assumes mortality risk by guaranteeing payments for life, though the amount of each payment is not guaranteed. A) A variable annuity D) 100% tax deferred. In a variable annuity contract, the provision that guarantees the annuitant payments for life is called the: It is the starting point of motivation because they generate emotions. C. A) The fact that the annuity payment may increase or decrease. B)I and III. C)II and IV. *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. "Variable Annuities: What You Should Know," Page 3. A registered representative's (RR) customer is speaking of a variable life insurance contract he owns. FINRA. They are more suitable for individuals who can fund the annuity with cash, want to supplement existing retirement benefits they have already funded, are comfortable with the market risk associated with a VA separate account portfolio and anticipate a long retirement. The number of annuity units is fixed at the time of annuitization. When may a variable annuity account be surrendered? C) taxed as ordinary income only to the extent of earnings. B)a majority vote from the shareholders is required to change the investment objectives. D)Joint and last survivor annuity. Therefore only a fixed annuity could be considered as suitable. D) Variable annuity. D)I and IV. \end{array} 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. During the accumulation phase, the number of accumulation units will increase as additional money is invested. The value of the separate account is now $30,000. Question #27 of 48Question ID: 606818 D) a variable annuity contract is subject to fluctuating values due to market fluctuations of the underlying separate accounts. Variable annuity salespeople must register with all of the following EXCEPT: Reference: 12.3.3 in the License Exam. B) A 30 year old construction worker recently unemployed who wants to invest his severance pay amounting to 9 months salary. An investor who purchases a fixed annuity contract assumes purchasing-power risk.
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