An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are Get Started. For example, when paying rent, the rent payment (PMT) Consequently, the client pays taxes only on the growth portion of the withdrawal ($10,000). Which of the following statements is not true about the characteristics of a trend? Question #15 of 48Question ID: 606804 At the end of the year your account has a value of 10750. *A joint life with last survivor contract covers multiple annuitants and ceases payments at the death of the last surviving annuitant. Reference: 12.3.3 in the License Exam. You can tailor the income stream to suit your needs. *A variable annuity payout is determined by comparing account performance with AIR, and this month's payout with last month's payout. The growth portion is subject to a 10% penalty. Diagnosis is made by punch biopsy. C)annuity units. C) II and IV. If the contract holder dies before the period expires, the remaining payments are made to the beneficiary. The separate account performance compared to an assumed interest rate. Reference: 12.1.2 in the License Exam. A) I and II. B)I and II We also reference original research from other reputable publishers where appropriate. II. For this potential advantage, the investor, rather than the insurance company, assumes the investment risk. II. I. Distribution can take place before or during any solicitation for sale. A) 2800. 2019 Ted Fund Donors They are also not considered suitable for anyone who anticipates needing a lump sum within a short time frame to fund other endeavors. C) 3800. A registered representative explaining variable annuities to a customer would be CORRECT in stating that: D) I and III. 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. The largest monthly check an annuitant can receive for the rest of his life is generated by a straight life (life income or life only) payout option. All of the following characteristics are shared by both a mutual fund and a variable annuity's separate account EXCEPT: Reference: 12.3.1 in the License Exam. If you need to withdraw money from the account because of a financial emergency, you may face surrender fees. 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. Table1. B) taxed as ordinary income. A) a variable annuity contract will provide a fluctuating monthly check upon the annuitization of the contract D) each annuity unit's value varies with time, but the number of annuity units is fixed. B) suitable if she has enough equity in the home to fund the variable annuity without cashing out the other VA contract Question #47 of 48Question ID: 606813 When the first party dies, the annuity payment is made to the survivor. Her agent recommended she choose a variable annuity as a safe haven for the funds. 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. Question: The following are characteristics of a public conglomerate: I) It is designed to operate various divisions for the long run. Question #38 of 48Question ID: 606798 C) Unit refund life option $63,000 b.$51,000 c. $18,000 d.$6,000. \hspace{10pt} \text{Warehouse salaries} & 110,000 & \hspace{10pt} \text{Social security tax withheld} & 51,714\\ The distribution of questions by topic is not intended to represent the 39) A variable annuity has the following guarantees: [PDF] Understanding your variable annuity UBS Variable annuities are long-term investment vehicles that with these securities as well insurance company and do not apply to the investment The growth portion is subject to a 10% penalty. II. B) II and III This customer has no spouse or dependents, which negates the value of the death benefit. A) a minimum rate of return is guaranteed. 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. When a partial withdrawal is made from an annuity, the earnings are considered to be taken out first for tax purposes (or LIFO). In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. A) I and IV. The $30,000 contract value represents $10,000 of contributions and $20,000 of earnings. Reference: 12.3.3 in the License Exam. B)a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero The holder of a variable annuity receives the largest monthly payments under which of the following payout options? On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity). D) The investment risk is shared between the insurance company and the policyowner. Fixed Annuity, Retirement Annuities: Know the Pros and Cons. *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. However, at the end of the period certain the payments to the named beneficiary (the spouse) will stop. On any device & OS. C) I and III. D)II and III. C) 3000. 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. Vaccine has decreased the incidence. II) It has an internal capital market wherein each division competes for funds. (The exception is the fixed income annuity, which has a moderate to high payout that rises as the annuitant ages). *Fixed income instruments, like bonds and fixed annuities, are subject to purchasing power risk. B) accumulation units. The value of the separate account is now $30,000. 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. Because common stocks are not fixed dollar investments, they have the opportunity to keep pace with inflation. A)the number of annuity units becomes fixed when the contract is annuitized. 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. The annuitant may not contribute and withdraw simultaneously. Which of the following is characteristic of variable annuities? It may be used by nongovernmental . A)II and IV. What Are Ordinary Annuities, and How Do They Work (With Example)? B) the number of annuity units is fixed, and their value remains fixed. C) II and IV A) I and III. The investor has already paid tax on the contributions but the earnings have grown tax-deferred. D)0. 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. do not have a separate account The payout compared to the initial payout upon annuitization. C)I and IV. Herpes Zoster has all of the following characteristics except: Group of answer choices. *The owner of a life annuity with 10-year period certain will receive payments for life, subject to a minimum of 10 years. A 3 Since the client is older than 59 at the time of distribution, the additional 10% penalty tax is not incurred. Reference: 12.2.1 in the License Exam. A) There is no risk in a variable annuity. A) Ordinary income tax on earnings exceeding basis. Science Health Science Nursing. When the second party dies, all payments cease. must be filed with FINRA. D)suitable due to the relative safety of the investment. . a life insurance holder lives longer than expected. B) It will be lower. A) mortality guarantee. What Are the Risks of Annuities in a Recession? B) II and IV. D) the payout plans 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 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. 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? D) not suitable because a lifetime income rider is only for someone who is already retired. What is the taxable consequence of this withdrawal to your client? The company's well-known Rock symbol is an icon of strength, stability, expertise and innovation that has stood the test of time. An accumulation unit in a variable annuity contract is: However, because the client is not yet age 59- when making the withdrawal, he also pays a 10% penalty, or $1,000. D) It cannot be determined until the April return is calculated. B) Exchange traded Funds (ETFs) or Exchange traded Notes (ETNs) A)II and IV. *A variable annuity does not guarantee an earnings rate because earnings will depend on the performance of the separate account. A) Any tax due is deferred. C) none of these. Life income riders are best suited for those who anticipate a lengthy retirement and are generally not yet retired when making the VA purchase. D) payments continue until age 70-. Policyholders . A) It will be higher. A 32-year-old with a company-sponsored 401k plan who will need a lump sum soon to finance graduate school tuition Fixed annuities pay a fixed monthly benefit which loses purchasing power if there is inflation. B) I and III. A) defined contribution plans. Once a customer annuitizes a variable annuity, which of the following statements are TRUE? 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. C) II and IV. 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. The money paid in will be returned tax free, but the earnings portion will be taxed as ordinary income. \hspace{7pt} b. January 444, to record the employers payroll taxes on the payroll to be paid on January 444. C) II and IV. One of the following would achieve that objective but a suitability discussion regarding it's risk should also occur. Of the total payroll for the last week of the year, $30,000\$30,000$30,000 is subject to unemployment compensation taxes. A)IPO. A) partially a tax-free return of capital and partially taxable. A)II and IV. Are Variable Annuities Subject to Required Minimum Distributions? Future annuity payments will vary according to the separate account's performance. A) Dow Jones Industrial Average. How does an indexed annuity differ from a fixed annuity? can be sold by someone with only an insurance license A variable annuity is a type of annuity contract in which the value can vary based on the performance of an u . is required by the Securities Act of 1933. She will receive the annuity's entire value in a lump-sum payment. No, annuities are not FDIC-insured as they are not bank products. B) Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. Post navigation This compensation may impact how and where listings appear. MetLife offers a comprehensive benefits program, including healthcare benefits, life insurance, retirement benefits, parental leave, legal plan services and paid time off. III. As with most retirement account options, withdrawals before the age of 59 will result in a 10% tax penalty. Once the contract is annuitized, monthly payments to the customer are: Your 65-year-old client owns a nonqualified variable annuity. A prospectus for a variable annuity contract: All of the following statements concerning a variable annuity are correct EXCEPT: a life insurance holder dies sooner than expected. C)municipal bonds. All of the following statements about variable annuities are true EXCEPT: Registration with FINRA is de facto registration with the SEC; no registration is required by the state banking commission. Changes in payments on a variable annuity correspond most closely to fluctuations in the: Among annuities, variable annuities differ from fixed annuities, which provide a specific and guaranteed return. The upside was the possibility of higher returns during the accumulation phase and a larger income during the payout phase. Reference: 12.1.2 in the License Exam, Question #21 of 48Question ID: 606812 Immediate annuities purchase annuity units directly. C)The entire $10,000 is taxable as ordinary income. C)Life annuity. 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. Question #41 of 48Question ID: 606801 must provide full and fair disclosure. Final answer. On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity). D)II and III. *The customer, in the accumulation stage of the annuity, is holding accumulation units. D) Variable annuity. The value of the customer's account is converted into annuity units if and when the customer decides to annuitize the contract. When a partial withdrawal is made from an annuity, the earnings are considered to be taken out first for tax purposes (or LIFO). a) What percentage of Facebook's users are from the United States? For an insurance company, mortality risk turns out unfavorably if: They offer broad diversification in the securities market and potential growth, all while using the power of tax deferral. If the account is annuitized, the investor has chosen a payout option. variable annuity without paying tax at the time of the transfer. D)partially a tax-free return of capital and partially taxable. C) The portion of the premium invested in the insurance company's general account is used to provide for the minimum guaranteed amount of the death benefit. B)Variable annuities. Uses in Investing, Pros, and Cons, Indexed Annuity: Definition, How It Works, Yields, and Caps. His objective is monthly income that he can receive after he retires to supplement his small pension and social security benefits. III) A hierarchy of corporate staff evaluates divisions' plans and performance. B) I and II. the agent must be licensed in both insurance and securities. B) I and II. The annuitized payments are viewed for tax purposes as D) a minimum of 10 years of variable payments, followed by additional variable payments for life. a variable annuity guarantees payments for life. C)3800. Your client owns a variable annuity contract with an AIR of 4%. B) the client may vote for the board of directors or board of managers. C) annuity units. Insurance companies introduced the variable annuity as an opportunity to keep pace with inflation. Classifying annuities There are many categories of annuities. In a variable life annuity with 10-year period certain, a contract holder receives: variable An immediate annuity consists of a Single Premium T has an annuity that guarantees an income payment for the rest of his life. An annuity payment is the dollar amount of the equal periodic payment in an annuity environment. D) II and IV. Question #37 of 48Question ID: 606817 A) II and III. Reference: 12.2.1 in the License Exam, Question #48 of 48Question ID: 606835 Your client owns a variable annuity contract with an AIR of 4%. Practice all cards. Refinancing a home to draw out equity has been identified by FINRA as an abusive sales tactic regarding the sales of VAs. A) waiver of premium When the second party dies, all payments cease. 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. D) I and IV. Your client has a large sum of money to invest from the proceeds of the sale of his home. In addition, if the customer is not at least 59-, there will be a tax penalty of an additional 10%. C) The insurance company. The tax on this is $2,800 ($10,000 x 28%). C) II and III. Which of the following is not a characteristic of a program module? This factor is used to establish the dollar amount of the first annuity payment. IBM Noida, Uttar Pradesh, India4 weeks agoBe among the first 25 applicantsSee who IBM has hired for this roleNo longer accepting applications. In March, the actual net return to the separate account was 8%. The growth portion is taxed as ordinary income. B)100% taxable. Home; About. Ideally they should be funded with readily available cash rather than using funds liquidated from existing investments. The beneficiary is taxed at ordinary income rates during the year the lump sum is received. A) periodic payment immediate annuity. None of the other investments listed here offer tax-deferred growth. D) accumulation shares. D) The fact that periodic payments into the contract may increase or decrease. Lifetime vs. fixed period annuities D) 4500. Distributions from such an annuity are computed on a LIFO basis with the income taxed first.