Once a variable annuity has been annuitized: For a nonqualified variable annuity, cost basis for the annuitant would use the after-tax dollars contributed. C)the invested money will be professionally managed according to the issuers' investment objectives. The separate account is used for both variable life insurance and variable annuity investments. Though there is no beneficiary designation during the annuitization, this is not an issue for this annuitant. CDs insured by the FDIC. The client's investment objectives, tax bracket, investment experience and risk tolerance all align well with a VA recommendation. C)Mortality risk. For an investor, which of the following is the most important factor in determining the suitability of a variable annuity investment? 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: The fixed payment that the annuitant receives loses purchasing power over time as a result of inflation. 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. In a variable annuity contract, the provision that guarantees the annuitant payments for life is called the: Home; About. A registered representative explaining variable annuities to a customer would be CORRECT in stating that: (The exception is the fixed income annuity, which has a moderate to high payout that rises as the annuitant ages). This would not align with the couple's criteria for coverage as long as they both live. D) minimum guaranteed death benefit. Consequently, the client pays taxes only on the growth portion of the withdrawal ($10,000). Investopedia does not include all offers available in the marketplace. The remainder of the premium is invested in the separate account. PGIM Fixed Income, a division of PGIM Inc., an SEC-registered investment adviser and a business unit of Prudential Financial, Inc. is seeking a Portfolio Risk Surveillance Analyst. A Variable Annuity Has Which of the Following Characteristics A) I and II. *During the accumulation phase, the number of accumulation units will increase as additional money is invested. A variable annuity does not guarantee an earnings rate because earnings will depend on the performance of the separate account. The AG49-A Revisions C) the yield is always higher than bond yields. Which of the following statements regarding variable annuities are TRUE? \hspace{10pt} \text{Office salaries} & \underline{234,000} & \hspace{10pt} \text{Medicare tax withheld} & 15,210\\ C) 3800. The anti-money laundering rules for insurance companies highlight that each insurance company - like other financial institutions subject to anti-money laundering program requirements - must develop a risk-based anti-money laundering program that identifies, assesses, and mitigates any risks of money laundering, terrorist financing, and other The value of these units varies with the performance of the separate account. B)Tax-free municipal bonds continues payments only as long as all annuitants are still alive. D) Growth mutual funds. These contracts cover both lives and will continue to make payments until the last spouse dies. An Immediate Annuity is designed to provide each of the following features, EXCEPT: The creation of an estate. B)It will be lower. \hspace{10pt} State unemployment (employer only), 3.8%3.8\%3.8% They offer broad diversification in the securities market and potential growth, all while using the power of tax deferral. B)variable annuities are classified as insurance products. C)annuity units. 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. Variable Annuity Advantages and Disadvantages, Guide to Annuities: What They Are, Types, and How They Work. A customer has a nonqualified variable annuity. *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) I and III. How is the distribution taxed? "Variable Annuities: What You Should Know," Pages 67. Random withdrawals do not guarantee how long the money will last because large withdrawals can deplete the funds before the annuitant dies. Of the 4 client profiles below, which might be the best suited for a variable annuity recommendation? A guaranteed lifetime annuity promises to pay the owner an income for the rest of their life. The tax on this amount is $3,000. If your customer invests in a variable annuity and chooses to annuitize at age 65, which of the following statements are TRUE? A registered representative's (RR) customer is speaking of a variable life insurance contract he owns. An 18-year-old, unmarried high school student sought a safe investment for a $30,000 bequest until after she graduated from college. Reference: 12.1.2 in the License Exam. B) I and III. 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 Are There Penalties for Withdrawing Money From Annuities? The funds in an annuity are off-limits to creditors and other debt collectors. D) I and III Reference: 12.3.3 in the License Exam. A)the state banking commission. D) an accounting measure used to determine the contract owner's interest in the separate account. 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. The entire amount is taxed as ordinary income. B) II and IV. are purchased primarily for their insurance features If your client, who is in the 28% tax bracket, makes a lump-sum withdrawal of $15,000, what tax liability results from the withdrawal? A) II and IV. A) mortality guarantee. C) A 10% penalty plus the payment of ordinary income tax on all of the funds withdrawn. D)I and III. 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. a variable annuity does not guarantee payments for life. A) Only during the payout period. A)I and IV. Usually the term "annuity" relates to a contract between an individual and a life insurance company. D) I and III. A registered representative recommends a variable annuity with an income rider to a client. D)variable annuities. This recommendation is: Distributions to the annuitant will fluctuate during the payout period. 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. \hspace{7pt} a. December 303030, to record the payroll. Most annuities will not allow you to withdraw additional funds from the account once the payout phase has begun. Her agent recommended she choose a variable annuity as a safe haven for the funds. However, it does guarantee payments for life (mortality). It may be used by nongovernmental . C)III and IV An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are Get Started. C)A 10% penalty plus the payment of ordinary income tax on all of the funds withdrawn. Shortening the Securities Transaction Settlement Cycle Because the client is older than age 59-, he does not pay 10% premature distribution penalty tax. 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)Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. Listing tax-deferred growth as an objective for retirement income, which of the following investments is most suitable? 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. In this case, the investor is taking a lump-sum distribution before reaching age 59- and must pay an additional 10% penalty on the taxable amount. \hspace{10pt} \text{Warehouse salaries} & 110,000 & \hspace{10pt} \text{Social security tax withheld} & 51,714\\ no. C)II and IV. An 18-year-old, unmarried high school student sought a safe investment for a $30,000 bequest until after she graduated from college. variable An immediate annuity consists of a Single Premium T has an annuity that guarantees an income payment for the rest of his life. A 32-year-old with a company-sponsored 401k plan who will need a lump sum soon to finance graduate school tuition D)Any tax due is deferred. The beneficiary is taxed at ordinary income rates during the year the lump sum is received. Your client owns a variable annuity contract with an AIR of 4%. d. Each month the payment will increase, decrease, or remain the same as the previous month's payment . Once the cost basis is reached, any further withdrawals are a nontaxable return of principal. 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. Changes in payments on a variable annuity correspond most closely to fluctuations in the: A)number of annuity units. C)none of these. C) suitable regardless of funding sources A registered representative recommends a variable annuity with an income rider to a client. Question #35 of 48Question ID: 606810 You can buy an annuity with either a lump sum or a series of payments, and the accounts value will grow accordingly. For example, if the income is monthly, the first payment comes one month after the immediate annuity is bought. \text{Salaries:} && \text{Deductions:}\\ 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. Your customer in his early 30s has received a modest inheritance from a relative. D)suitable due to the relative safety of the investment. All of the following investment strategies offer either fully or partially tax-deductible contributions to individuals who meet eligibility requirements EXCEPT: A) I and II *The minimum guaranteed death benefit is provided by that portion of the payment invested in the insurance company's general account. D) Keogh plans. Ideally they should be funded with readily available cash rather than using funds liquidated from existing investments. A customer has an investment objective of keeping pace with inflation while assuming moderate risk. C) value of underlying securities held in the separate account. B)Fixed annuity contract with a discussion regarding timing risk Based on the clients profile which of the following would be the best recommendation? *A variable annuity payout is determined by comparing account performance with AIR, and this month's payout with last month's payout. Which of the following is NOT associated with characteristics of shares B) variable annuities. 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: FINRA. have investment risk that is assumed by the investor *An immediate annuity has no accumulation period. A)not suitable They are also riddled with fees, which can cut into profits. C) The insurance company. & \underline{\underline{\$1,014,000}} & \hspace{10pt} \text{U.S. savings bonds} & 30,420\\ 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. A) I and III. Simple and general annuities problems with solutions What type of annuity has a cash value that is based upon the performance of it's underlying investment funds? Based on this information the RR should: Travel Times Journal found that the average per person cost of a 10-day trip along the Pacific coast, per person, is $1,015. Inflation-hedging, using both tax deferral combined with market growth potential, is made possible by variable annuities #. Chapter 12: Variable Annuities Flashcards | Quizlet Which of the following are defined as securities? a life insurance holder dies sooner than expected. a variable annuity has which of the following characteristics PDF Variable Annuities: What You Should Know - SEC If an investor has a fixed-annuity contract with an insurance company, which of the following risks is assumed by the investor? 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. *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. IBM is a global brand and has its presence in 170 countries and operates . D)the rate of return is determined by the underlying portfolio's value. What Are the Distribution Options for an Inherited Annuity? The earnings on dollars invested into a variable annuity accumulate tax deferred, which is why variable annuities are popular products for retirement accumulation. Based on the information given in the question, the VA recommendation would not be suitable. U.S. Securities and Exchange Commission. The funds are not liquid due to the surrender fees, and there is also a 10% penalty on withdrawals before age 59-. The growth portion is subject to a 10% penalty. Question #19 of 48Question ID: 606826 Policyholders . 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. The holder of a variable annuity receives the largest monthly payments under which of the following payout options? The growth portion is subject to a 10% penalty. An immediate annuity is designed to pay an income one time-period after the immediate annuity is bought. The $30,000 contract value represents $10,000 of contributions and $20,000 of earnings. You can tailor the income stream to suit your needs. Spartan Technology Services and Solutions Private Limited is a subsidiary of IBM (International Business Machines) Corporation. She will receive the annuity's entire value in a lump-sum payment. D) a variable annuity contract is subject to fluctuating values due to market fluctuations of the underlying separate accounts. In addition, if the customer is not at least 59-, there will be a tax penalty of an additional 10%. 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. A) periodic payment immediate annuity. Then find the probability of the event. B)Two-thirds of the withdrawal is taxable as ordinary income. Flashcards - Securities and Tax - FreezingBlue Lifetime vs. fixed period annuities Once a variable annuity has been annuitized: the agent must be licensed in both insurance and securities. Annuities are complicated products, so that may be easier said than done. A) 2800. How does an indexed annuity differ from a fixed annuity? 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. B)I and IV. B) the rate of return is determined by the underlying portfolio's value. 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} a. December 303030, to record the payroll. While variable annuities have greater potential for earnings, since their interest rate rises and falls with their underlying investments, they can lose money. All of the following characteristics are shared by both a mutual fund and a variable annuity's separate account EXCEPT: Fixed Annuity: A fixed annuity is a type of annuity contract that allows for the accumulation of capital on a tax-deferred basis. Reference: 12.2.1 in the License Exam. All of the following are true about annuities EXCEPT: they have all the same characteristics as life insurance. Anthony Battle is a CERTIFIED FINANCIAL PLANNER professional. Variable annuities grow tax-deferred, so you dont have to pay taxes on any investment gains until you begin receiving income or make a withdrawal. D) Any time before the accumulation period. 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. Life Insurance vs. Annuity: What's the Difference? Reference: 12.1.4.1 in the License Exam. D)II and III. C)number of accumulation units. C)earnings only and taxable used for the investment of funds paid by contract holders. *The investor has already paid tax on the contributions but the earnings have grown tax-deferred. Question #22 of 48Question ID: 606803 The number of annuity units becomes fixed when the contract is annuitized; it is the value of each unit that fluctuates. 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. D) 4200. The following changes have been incorporated into Special Publication 800145, as of the date indicated - . Reference: 12.3.3 in the License Exam. D) I and II. At the end of the year your account has a value of 10750. C) suggest to the client that perhaps a loan or refinancing his vacation home might be a better way to fund the contract purchase. Solved The following are characteristics of a public | Chegg.com C)II and IV. B) prime rate. All of the following are characteristics of a variable annuity, except 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. A) the investment portfolio is managed professionally. national origin, genetics, disability, age, veteran status, or any other characteristic protected by law. U.S. Securities and Exchange Commission. Once a customer annuitizes a variable annuity, which of the following statements are TRUE? Question #29 of 48Question ID: 606831 The client agrees to purchase the contract and informs the RR that he will be cashing out a VA he purchased 2 years ago to fund the new contract and will forward the check as soon as he receives it. Reference: 12.3.3 in the License Exam. D) a minimum of 10 years of variable payments, followed by additional variable payments for life. The paper publication will not be rereleased. When a variable annuity contract is annuitized, the number of annuity units is fixed. I. When the second party dies, all payments cease. A registered representative explaining variable annuities to a customer would be CORRECT in stating that: Sas#8-psy 002 - Organizational Behavior B)Capital gains taxation on the earnings withdrawn in excess of the owner's basis. She will receive the annuity's entire value in a lump-sum payment. C)3800. *The accumulation period of a variable annuity may continue for many years. B)I and III. 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 IBM hiring Practitioner- Policy Admin in Noida, Uttar Pradesh, India Deferred Annuity Definition, Types, How They Work, What Is a Fixed Annuity? A) waiver of premium Try Reasonable accommodations may be made to enable individuals with disabilities to perform the essential functions.
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