D) expense guarantee. Because common stocks are not fixed dollar investments, they have the opportunity to keep pace with inflation. An investor who purchases a fixed annuity contract assumes purchasing-power risk. *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. U.S. Securities and Exchange Commission. How to Rollover a Variable Annuity Into an IRA. A trend is formed from non-repetitive actions of people. *When money is deposited into the annuity, it is purchasing accumulation units. The number of accumulation units can rise during the accumulation period. Owners of variable annuities, like owners of mutual fund shares, may vote on changes in investment policy and for an investment adviser. C)number of accumulation units. 8 annuities provide a guaranteed rate of return, whereas annuities provide conservative to aggressive investments whose rates of return are not guaranteed. Annuities due are a type of annuity where payments are made at the beginning of each payment period. Of the answer choices given the best would be to reevaluate the recommendation based on the new information tendered by the client. Once a customer annuitizes a variable annuity, which of the following statements are TRUE? B) single payment deferred annuity. B) Age 78, retired for 20 years, lives comfortably and wants to leave all liquid assets to children B) with guaranteed minimum withdrawal benefits (GMWBs) the periodic payments can be monthly, quarterly or annually 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. In March, the actual net return to the separate account was 8%. This guideline has been prepared for use by Federal agencies. a variable annuity does not guarantee an earnings rate of return. View full document. C) insurance guarantee. C) the yield is always higher than bond yields. Because the client is older than age 59-, he does not pay 10% premature distribution penalty tax. Accumulation Period of Fixed Annuities During this period, premiums are credited with interest which accumulates on a yearly basis. D) payments continue until age 70-. Practice all cards. B) payments continue until the death of the primary owner. The beneficiary is taxed at ordinary income rates during the year the lump sum is received. Round to the nearest hundredth of a percent. Post navigation The figure below illustrates a six-month annuity with monthly payments. An accumulation unit in a variable annuity contract is: A)an accounting measure used to determine the contract owner's interest in the separate account. B) During the accumulation period. The money paid in will be returned tax free, but the earnings portion will be taxed as ordinary income. Which of the following is NOT an accurate statement concerning a variable life insurance contract? The accumulation unit's value is used to calculate the total value of the account. A)2800. A) Life-only annuity C) be returned to the separate account. The number of accumulation units can rise during the accumulation period. The earnings are taxable but the cost basis is returned tax free. C)II and IV. The growth portion is taxed as ordinary income. *Contributions to a nonqualified variable annuity are not tax deductible. Salaries:SalessalariesWarehousesalariesOfficesalaries$670,000110,000234,000$1,014,000Deductions:IncometaxwithheldSocialsecuritytaxwithheldMedicaretaxwithheldU.S. C) with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed Question #44 of 48Question ID: 606797 C)II and IV. *Fixed income instruments, like bonds and fixed annuities, are subject to purchasing power risk. D) Variable annuity. B) I and II. A)II and IV. C)complete all paper work to purchase the annuity contract and obtain the clients signature immediately. C) 3800. Which of the following statements regarding variable annuities are TRUE? MetLife offers a comprehensive benefits program, including healthcare benefits, life insurance, retirement benefits, parental leave, legal plan services and paid time off. What is the taxable consequence of this withdrawal to your client? However, a discussion should occur regarding the risks that are associated with a fixed annuity; purchasing power risk. D) The investment risk is shared between the insurance company and the policyowner. D)money market funds. The growth portion is subject to a 10% penalty. What is the annual cash flow generated from the new machine? Determine whether the following events are independent or dependent. In the case of deferred annuities, this is often referred to as the accumulation phase. All of the following are characteristics of a variable annuity, except: a. \hspace{10pt} State unemployment (employer only), 3.8%3.8\%3.8% $63,000 b.$51,000 c. $18,000 d.$6,000. D) I and III. D)separate account may consist of mutual funds. All of the following are true about annuities EXCEPT: they have all the same characteristics as life insurance. D) II and III. Securely download your document with other editable templates, any time, with PDFfiller. An accumulation unit in a variable annuity contract is: The most popular type of variable annuity is a deferred annuity. II) It has an internal capital market wherein each division competes for funds. The $30,000 contract value represents $10,000 of contributions and $20,000 of earnings. Anthony Battle is a CERTIFIED FINANCIAL PLANNER professional. Reference: 12.1.2.1.2 in the License Exam. The annuity unit's value represents a guaranteed return. *Variable annuity contracts must be sold by prospectus due to the characterization of the separate accounts as securities, which must be registered under the Securities Act of 1933 and the Investment Company Act of 1940. Refinancing a home to draw out equity has been identified by FINRA as an abusive sales tactic regarding the sales of VAs. used for the investment of funds paid by contract holders. A) Dow Jones Industrial Average. The most suitable option and one considered effective for married couples is a single joint and last survivor contract. approve changes in the plan portfolio. 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. D) Growth mutual funds. The value of accumulation and annuity units varies with the investment performance of the separate account. the state banking commission. *Once a variable annuity is annuitized, the accumulation units are converted into a fixed number of annuity units. The customer, in the accumulation stage of the annuity, is holding accumulation units. The investor purchased accumulation units. All of the following statements about variable annuities are true EXCEPT: D)I and III. As part of the registration requirements, a prospectus must be filed and distributed to prospective investors. None of the other investments listed here offer tax-deferred growth. The growth portion is subject to a 10% penalty. I. A) A variable annuity Annual depreciation on the machine is$12,000, and the tax rate of the company is 25%. Registration with FINRA is de facto registration with the SEC; no registration is required by the state banking commission. can be sold by someone with only an insurance license 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. Reference: 12.3.3 in the License Exam. Reference: 12.1.2 in the License Exam, Question #23 of 48Question ID: 901858 Contributions to an IRA may be tax deductible, depending on the individual's earnings and participation in a company-sponsored qualified retirement plan. Diagnosis is made by punch biopsy. Life Insurance vs. Annuity: What's the Difference? B) a variable annuity contract is not required to be sold by prospectus because it is an insurance contract B) allow customers to opt out of sharing of financial information with certain nonaffiliated firms. D) value of accumulation units. B)a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero Her intent was to use the funds for the down payment on a house after graduation. All of the following characteristics are shared by both a mutual fund and a variable annuity's separate account EXCEPT: D) A 10% penalty plus the payment of ordinary income tax on funds withdrawn in excess of the owner's basis. D) III and IV. A) complete all paper work to purchase the annuity contract and obtain the clients signature immediately. Which of the following recommendations would best meet the customer profile? They can be classified by: Nature of the underlying investment - fixed or variable *A periodic payment immediate annuity is a contradiction in terms. a variable annuity guarantees an earnings rate of return. This cloud model is composed of five essential characteristics, three service models, and four deployment models. An annuitant assumes the investment risk of a variable annuity and is not protected byt he insurance company from capital losses. 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. 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. They offer broad diversification in the securities market and potential growth, all while using the power of tax deferral. b. (primary needs). have investment risk that is assumed by the investor Science Health Science Nursing. The holder of a variable annuity receives the largest monthly payments under which of the following payout options? 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. Reference: 12.2.1 in the License Exam. For a retired person, which of the following investments would provide the greatest protection against inflation? A) the investment portfolio is managed professionally. This recommendation is: B) I and III. Question #36 of 48Question ID: 606805 On an annual basis, the machine will produce 20,000 units with an expected selling price of $10, prime costs of$6 per unit, and a fixed cost allocation of $3 per unit. Reference: 12.1.2 in the License Exam. Nicks Enterprises has purchased a new machine tool that will allow the company to improve the efficiency of its operations. Future annuity payments will vary according to the separate account's performance. C) During the annuity period. 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: What type of annuity has a cash value that is based upon the performance of it's underlying investment funds? That can adversely affect your returns over the long term, compared with other types of investments. 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. Ideally they should be funded with readily available cash rather than using funds liquidated from existing investments. D) 4200. 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. About Us B)I and IV. A universal variable life policy should be purchased primarily for its insurance features, not its investment features. Fixed annuities, on the other hand, provide a guaranteed return. U.S. Securities and Exchange Commission. On any device & OS. D) an accounting measure used to determine the contract owner's interest in the separate account. B)part earnings and part cost basis 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) Universal variable life policy. Given that all of the current retirement investments are subject to market risk, the customer wants these new funds to have no market risk exposure. If an insurance holder dies sooner than expected, the insurance company will have to pay the death benefit sooner. *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. Your client owns a variable annuity contract with an AIR of 4%. A customer has contributed $1,000 a year for 10 years to his tax-deferred nonqualified variable annuity. What is the taxable consequence of this withdrawal to your client? D)I and II. *Insurance companies introduced the variable annuity as an opportunity to keep pace with inflation. ($5,000) to a stock fund. *If the separate account of a variable annuity with an AIR of 4% had actual net earnings of 8% in March, the April payment will be higher than the March payment. If an investor has purchased an immediate variable annuity, which of the following statements best describe the investment? D) not suitable because a lifetime income rider is only for someone who is already retired. 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. C) taxed as ordinary income only to the extent of earnings. What Are the Risks of Annuities in a Recession? a life insurance holder lives longer than expected. It is innate and universal. Since the client is older than 59 at the time of distribution, the additional 10% penalty tax is not incurred. If the customer takes a withdrawal of $10,000, what are the tax consequences? D) tax free. Instructions\textsf{\textcolor{#4257b2}{Instructions}}Instructions The annuitized payments are viewed for tax purposes as C) such an annuity is designed to combat inflation risk. The value of these units varies with the performance of the separate account. Reference: 12.2.1 in the License Exam. Explain what is meant by positive and negative D) I and III Clusters of vesicles in various stages. 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. C)Variable annuity contract with a discussion regarding interest rate risk D) None, because it is the proceeds from a life insurance company. A)It will stay the same. A)accumulation shares. Question #41 of 48Question ID: 606801 IBM Noida, Uttar Pradesh, India4 weeks agoBe among the first 25 applicantsSee who IBM has hired for this roleNo longer accepting applications. By clicking Accept All Cookies, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts. 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. D)II and IV. 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. An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are. All of the following statements regarding variable annuities are true EXCEPT: A) variable annuities offer the investor protection against capital loss. D)accumulation units. 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. Variable annuities are riskier than fixed annuities because the underlying investments may lose value. A) I and IV. An annuity may be purchased under all of the following methods EXCEPT: B)II and III. withdraw funds without any tax consequences. A)II and III. 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: An individual retirement annuity is an investment vehiclesimilar to an individual retirement accountthat is offered by insurance companies. Ideally they should be funded with readily available cash rather than using funds liquidated from existing investments. IBM is a global brand and has its presence in 170 countries and operates . *The customer, in the accumulation stage of the annuity, is holding accumulation units. This factor is used to establish the dollar amount of the first annuity payment. D) Variable annuities. Before the contract is annuitized, your client, currently age 60, withdraws some funds for personal purposes. Distributions to the annuitant will fluctuate during the payout period. B) fixed in value until the holder retires. D)I and IV. Reference: 12.1.2 in the License Exam, Question #21 of 48Question ID: 606812 You can learn more about the standards we follow in producing accurate, unbiased content in our. A) be paid to a designated beneficiary. Fixed annuities pay a fixed monthly benefit which loses purchasing power if there is inflation. D) reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. Sample problems from Chapter 9. . Usually the term "annuity" relates to a contract between an individual and a life insurance company. Distribution can take place before or during any solicitation for sale. Most annuities will not allow you to withdraw additional funds from the account once the payout phase has begun. During the . 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. Question #32 of 48Question ID: 606815 As part of the registration requirements, a prospectus must be filed and distributed to prospective investors. B) I and IV. D) each annuity unit's value varies with time, but the number of annuity units is fixed. 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. Her agent recommended she choose a variable annuity as a safe haven for the funds. **Because common stocks are not fixed dollar investments, they have the opportunity to keep pace with inflation. Because this is not guaranteed, the policyowner bears the investment risk. The time period depends on how often the income is to be paid. Question #16 of 48Question ID: 606807 Income that cannot be outlived by the owner B)cost of living. 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 B) The death benefit cannot ever be more than the guaranteed benefit. D)I and III. D) II and IV. What Are Ordinary Annuities, and How Do They Work (With Example)? 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. The earnings on dollars invested into a variable annuity accumulate tax deferred, which is why variable annuities are popular products for retirement accumulation. D)variable annuities offer the investor protection against capital loss. An annuity is an insurance product that promises to pay out income at a future date based on invested funds. At the end of the year your account has a value of 10750. When the second party dies, all payments cease. The investor has already paid tax on the contributions but the earnings have grown tax-deferred. Are Variable Annuities Subject to Required Minimum Distributions? When a variable annuity contract is annuitized, the number of annuity units is fixed. B) 10% penalty plus payment of ordinary income tax on all funds withdrawn. The original investment has grown to a value of $60,000. must precede every sales presentation. Before the contract is annuitized, your client, currently age 60, withdraws some funds for personal purposes. What is her total tax liability? *During the accumulation phase, the number of accumulation units will increase as additional money is invested. B)IRAs. The value of a variable annuity is based on the performance of an underlying portfolio of sub accounts selected by the annuity owner. 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. However, it does guarantee payments for life (mortality). IV. d. Each month the payment will increase, decrease, or remain the same as the previous month's payment . Classifying annuities There are many categories of annuities. Your customer in his early 30s has received a modest inheritance from a relative. If the separate account of a variable annuity with an AIR of 4% had actual net earnings of 8% in March, the April payment will be higher than the March payment. 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. Immediate life annuity with 10-year period certain. Job Classification: Corporate - Legal and Compliance. B) 100% taxable. B)a minimum rate of return is guaranteed. Sub accounts and mutual funds are conceptually. The beneficiary is taxed at ordinary income rates during the year the lump sum is received. B)I and III. A) II and III. D)variable annuities. B)suitable regardless of funding sources Deal with mathematic Math is all about solving equations and finding the right answer. Insurance companies introduced the variable annuity as an opportunity to keep pace with inflation. A guaranteed lifetime annuity promises to pay the owner an income for the rest of their life. A)Fixed annuities. An 18-year-old, unmarried high school student sought a safe investment for a $30,000 bequest until after she graduated from college. Question #31 of 48Question ID: 606836 D) I and II. Question #12 of 48Question ID: 606814 externalities. are purchased primarily for their insurance features C) single payment immediate annuity. What Are the Distribution Options for an Inherited Annuity?
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