a variable annuity has which of the following characteristics

a life insurance holder lives longer than expected. A) changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. Travel Times Journal found that the average per person cost of a 10-day trip along the Pacific coast, per person, is $1,015. Reference: 12.1.2 in the License Exam, Question #23 of 48Question ID: 901858 *Contributions to a nonqualified variable annuity are not tax deductible. C) 3800. A) I and IV. B) It will be lower. C) taxed as ordinary income only to the extent of earnings. IBM Noida, Uttar Pradesh, India1 month agoBe among the first 25 applicantsSee who IBM has hired for this roleNo longer accepting applications. A Variable Annuity Has Which of the Following Characteristics Reference: 12.1.4 in the License Exam. 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. 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. B) A 30 year old construction worker recently unemployed who wants to invest his severance pay amounting to 9 months salary. A customer is receiving annuitized payments from a variable annuity. C) The insurance company. A single lump-sum investment is made, and payments begin immediately, since the investor has purchased annuity units. C)100% tax deferred. \end{array} Based on this information the RR should: An 18-year-old, unmarried high school student sought a safe investment for a $30,000 bequest until after she graduated from college. D)an accounting measure used to determine payments to the owner of the variable annuity. 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. Question #29 of 48Question ID: 606831 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. Diagnosis is made by punch biopsy. Variable annuity salespeople must register with all of the following EXCEPT: A) FINRA. 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. Simple and general annuities problems with solutions IBM Noida, Uttar Pradesh, India4 weeks agoBe among the first 25 applicantsSee who IBM has hired for this roleNo longer accepting applications. Your 55-year-old client invested $50,000 four years ago in a nonqualified variable annuity. C) II and III. Question: The following are characteristics of a public conglomerate: I) It is designed to operate various divisions for the long run. All of the following are characteristics of variable annuity contracts D) Age 27, saving for first home. 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. a) What percentage of Facebook's users are from the United States? Following the transition to T+1 in the U.S. markets, Commission staff will continue to work with industry leaders, public interest advocates, investors and other regulators to assess the future feasibility of a T+0 settlement standard cycle, and seek to identify ways to overcome the challenges associated with such a move, as articulated in the . D) I and II. How Good of a Deal Is an Indexed Annuity? Job Classification: Corporate - Legal and Compliance. A the safety of the principal invested B the yield is always higher than bond yields. 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. B) Life annuity. B) a variable annuity contract is not required to be sold by prospectus because it is an insurance contract A) I and II. A) Any tax due is deferred. A) It will be higher. The correct answer was: partially a tax-free return of capital and partially taxable. B) a variable annuity contract is not required to be sold by prospectus because it is an insurance contract D)It cannot be determined until the April return is calculated. 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. D) I and IV. Question #12 of 48Question ID: 606814 A)an accounting measure used to determine the contract owner's interest in the separate account. A)II and IV. Trends Networks and Critical Thinking Module 2 Home; About. But again, the need to designate beneficiaries is not an issue for this annuitant. A variable annuity is both an insurance and a securities product. What Are the Risks of Annuities in a Recession? B) The death benefit cannot ever be more than the guaranteed benefit. Reference: 12.2.1 in the License Exam. P=525p2+65,326p185,000E=326p+185,000P=-525 p^{2}+65,326 p-185,000 \quad E=-326 p+185,000P=525p2+65,326p185,000E=326p+185,000. A variable annuity is both an insurance and a securities product. The beneficiary is taxed at ordinary income rates during the year the lump sum is received. D)A variable annuity, Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. An example would be if a life annuity with 10-year period certain contract holder died after 5 years, payments would continue for 5 more years to the beneficiary and then stop. C)Mortality risk. In March, the actual net return to the separate account was 8%. 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. However, they are protected by state guaranty associations in the event that the insurance company providing the product goes out of business. C)annuity units. 8 annuities provide a guaranteed rate of return, whereas annuities provide conservative to aggressive investments whose rates of return are not guaranteed. If at all you go deeper, then you will find a wide range of annuity products from a variety of companies. On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity). The annuitant may not contribute and withdraw simultaneously. A)I and IV. B) The proceeds minus John's cost basis taxed as ordinary income at Sue's tax rate. B) value of annuity units. is required by the Securities Act of 1933. Variable annuity salespeople must be registered with FINRA and the state insurance department. . C)prime rate. Once annuitized, the number of annuity units does not vary. C)Growth mutual funds If the owner of a variable annuity dies during the accumulation period, any death benefit will: A) I and II The earnings on dollars invested into a variable annuity accumulate tax deferred, which is why variable annuities are popular products for retirement accumulation. variable An immediate annuity consists of a Single Premium T has an annuity that guarantees an income payment for the rest of his life. Reference: 12.2.1 in the License Exam. Reference: 12.3.2.1 in the License Exam. Skylar Clarine is a fact-checker and expert in personal finance with a range of experience including veterinary technology and film studies. However, if you take a withdrawal during the contractssurrender period, which can be as long as 15 years, youll generally have to pay a surrender fee. When may a variable annuity account be surrendered? Universal variable life policies A customer has a nonqualified variable annuity. A)Fixed annuities. 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. B)Value of each annuity unit each month. *The minimum guaranteed death benefit is provided by that portion of the payment invested in the insurance company's general account. A) There is no risk in a variable annuity. The annuity unit's value represents a guaranteed return. 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. A) II and III. In a variable life annuity with 10-year period certain, a contract holder receives: *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. Licensed to sell Variable Annuities in the following state(s): FL, TX . B) I and II. However, it does guarantee payments for life (mortality). regulated under both securities and insurance laws. Changes in payments on a variable annuity correspond most closely to fluctuations in the: do not have a separate account The remainder of the premium is invested in the separate account. D)the safety of the principal invested. Question #43 of 48Question ID: 606809 A variable annuity does not guarantee an earnings rate because earnings will depend on the performance of the separate account. When the first party dies, the annuity payment is made to the survivor. A) Fixed annuities. D)I and III. Chapter 12 - Variable Annuities Flashcards | Chegg.com C) value of underlying securities held in the separate account. D) Growth mutual funds. can be sold by someone with only an insurance license 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: B) fixed in value until the holder retires. Reference: 12.1.2.1.1 in the License Exam. The value of the separate account is now $30,000. A 3 D)0. IV. A variable annuity is a security and must be registered with the SEC, not FINRA. used to escrow late or otherwise delinquent premium payments. A)Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. Qualified Longevity Annuity Contract (QLAC): Definition, Taxes, and Example, Present Value of an Annuity: Meaning, Formula, and Example, Future Value of an Annuity: What Is It, Formula, and Calculation, Calculating Present and Future Value of Annuities, Present Value Interest Factor of Annuity (PVIFA) Formula, Tables. A variable annuity has two phases: an accumulation phase and a payout (annuitization) phase. D) tax free. A) The entire amount is taxed as ordinary income, because it is not life insurance. B)Two-thirds of the withdrawal is taxable as ordinary income. continues payments as long as one annuitant is alive. can be sold by someone with only an insurance license Question #16 of 48Question ID: 606807 The number of annuity units becomes fixed when the contract is annuitized; it is the value of each unit that fluctuates. C)number of accumulation units. B)corporate stock. B) Municipal bonds. Underlying equity investments T, age 70, withdraws cash from a profit-sharing plan and purchases a Straight Life Annuity. All of the following are characteristics of a variable annuity, except: a. A)II and IV. Reference: 12.1.4.1 in the License Exam. The separate account performance compared to last month's performance. This compensation may impact how and where listings appear. Inflation-hedging, using both tax deferral combined with market growth potential, is made possible by variable annuities #. The number of annuity units rises once annuitization begins. Each of the remaining statements are true. Do homework Doing homework can help you learn and understand the material covered in class. Variable annuities gave buyers a chance to benefit from rising markets by investing in a menu of mutual funds offered by the insurer. C) a variable annuity contract does not guarantee any type of return Once the cost basis is reached, any further withdrawals are a nontaxable return of principal. Transcribed image text: 6. For example, when paying rent, the rent payment (PMT) Reference: 12.3.1 in the License Exam. A)not suitable Of the total payroll for the last week of the year, $30,000\$30,000$30,000 is subject to unemployment compensation taxes. Which of the following is not characteristic of a fixed annuity? an annuitant dies sooner than expected. C) II and IV. *Payments from a variable annuity depend on the securities' value in the separate account's underlying investment portfolio. He makes several statements regarding the contract. Ideally they should be funded with readily available cash rather than using funds liquidated from existing investments. A 60-year-old individual, nearing retirement who has both IRAs and a 401k in place, is comfortable with market risk associated with the stock market, and has a lump sum in cash available to fund the annuity B) During the accumulation period. Over the past five years, 's dividend yield has averaged % per year. All of the following investment strategies offer either fully or partially tax-deductible contributions to individuals who meet eligibility requirements EXCEPT: b) What probability is the 20%20 \%20% mentioned above? These contracts cover both lives and will continue to make payments until the last spouse dies. A) Fixed Annuity As with all tax-deferred accounts, municipal bonds are not appropriate investments because interest earned on municipals is already tax exempt at the federal level. Variable Annuities | Investor.gov A) two people are covered and payments continue until the second death. A) Life-only annuity B) II and III. B) accumulation units. A) a variable annuity contract will provide a fluctuating monthly check upon the annuitization of the contract Withdrawals from a nonqualified variable annuity are made on a LIFO basis, so the taxable earnings are considered taken out before principal. Reference: 12.3.3 in the License Exam. A)the number of annuity units becomes fixed when the contract is annuitized. B)I and IV. The fixed payment that the annuitant receives loses purchasing power over time as a result of inflation. The amount taxed is the amount of the lump-sum payment minus the deceased's cost basis in the investment. That can adversely affect your returns over the long term, compared with other types of investments. Round to the nearest hundredth of a percentile. If an investor has purchased an immediate variable annuity, which of the following statements best describe the investment? Listing tax-deferred growth as an objective for retirement income, which of the following investments is most suitable? C)earnings only and taxable The tax on this is $2,800 ($10,000 x 28%). It was a lump-sum purchase. A 45-year-old employed individual with no other retirement accounts in place An investor who purchases a fixed annuity contract assumes purchasing-power risk. D) not suitable because a lifetime income rider is only for someone who is already retired. A) Ordinary income tax on earnings exceeding basis. Ted's Bio; Fact Sheet; Hoja Informativa Del Ted Fund; Ted Fund Board 2021-22; 2021 Ted Fund Donors; Ted Fund Donors Over the Years. Reference: 12.3.1 in the License Exam. continues payments only as long as all annuitants are still alive. vote on proposed changes in investment policy. It's somewhat similar to a variable life insurance policy in that: You can choose how the product's value is invested. Here is how guaranteed lifetime annuities work. FINRA. A) Money market fund. "Variable Annuities: What You Should Know," Page 3. A) waiver of premium Once the cost basis is reached, any further withdrawals are a nontaxable return of principal. You can buy an annuity with either a lump sum or a series of payments, and the accounts value will grow accordingly. Variable annuities were introduced in the 1950s as an alternative to fixed annuities, which offer a guaranteedbut often lowpayout during the annuitization phase. A)variable annuities may only be sold by registered representatives. Distributions to the annuitant will fluctuate during the payout period. Fixed Annuity: A fixed annuity is a type of annuity contract that allows for the accumulation of capital on a tax-deferred basis. The growth portion is taxed as ordinary income. Based only on these facts, the variable annuity recommendation is One of the following would achieve that objective but a suitability discussion regarding it's risk should also occur. B)II and III. Prudential's businesses offer a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds, asset management, and real estate services. B) 100% taxable. 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. C)the yield is always higher than bond yields. As part of the registration requirements, a prospectus must be filed and distributed to prospective investors. Because common stocks are not fixed dollar investments, they have the opportunity to keep pace with inflation. 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. A universal variable life policy should be purchased primarily for its insurance features, not its investment features. VAs, blue chip mutual fund portfolios, ETFs and ETNs are all tied to market performance in some way and have risk characteristics that would not align in terms of suitability for this client. A variable annuity is just a tax-deferred annuity in which you get to choose how the value of the annuity is invested. D)the rate of return is determined by the underlying portfolio's value. *Universal variable life policies are insurance company products that should be purchased primarily for the insurance features they offer rather than as an investment. Who assumes the investment risk in a variable annuity contract? A 10% penalty applies only if distributions begin before age 59-. 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. These contracts come with high surrender charges. All of the following are accurate statements to make to the client EXCEPT For this potential advantage, the investor, rather than the insurance company, assumes the investment risk. What is the taxable consequence of this withdrawal to your client? && \hspace{10pt}\text{Group insurance} & \underline{45,630}\\ A)There is no tax as the withdrawal is considered return of capital. Reference: 12.1.2.1.2 in the License Exam. Life Insurance vs. Annuity: What's the Difference? Unit 12: Variable Annuities Flashcards | Chegg.com Question #37 of 48Question ID: 606817 Once the contract is annuitized, monthly payments to the customer are: D) Joint and last survivor annuity. 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 A) mutual fund units. C)II and IV. The holder of a variable annuity receives the largest monthly payments under which of the following payout options? Once the contract is annuitized, monthly payments to the customer are: must provide full and fair disclosure. Solved Which of the following is characteristic of variable - Chegg How is the distribution taxed? D) None, because it is the proceeds from a life insurance company. 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 funds are not liquid due to the surrender fees, and there is also a 10% penalty on withdrawals before age 59-. A)the state banking commission. There is a guaranteed minimum interest rate, normally amounting to between 1 and 3 percent. D) There is no guarantee regarding the investment results of the separate account. A) I and III. *The number of variable annuity accumulation units can rise during the accumulation period when additional units are being purchased. The separate account is NOT likely to invest in: An important basic characteristic of common stocks that makes them a suitable type of investment for the separate account of variable annuities is: D) I and IV. John is the annuitant in a variable plan, and Sue is the beneficiary. a variable annuity guarantees payments for life. Immediate annuities purchase annuity units directly. Uses in Investing, Pros, and Cons, Indexed Annuity: Definition, How It Works, Yields, and Caps. Vaccine has decreased the incidence. D)Joint and last survivor annuity. A) The fact that the annuity payment may increase or decrease. Fixed Annuity, Retirement Annuities: Know the Pros and Cons. A) Only during the payout period. A) a minimum rate of return is guaranteed. a variable annuity does not guarantee an earnings rate of return. This factor is used to establish the dollar amount of the first annuity payment. C) II and III. This would not align with the couple's criteria for coverage as long as they both live. 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)It will stay the same. Is F&G Annuities & Life Inc (FG) a Good Dividend Stock? | AAII "Variable Annuities: What You Should Know," Page 6. An individual retirement annuity is an investment vehiclesimilar to an individual retirement accountthat is offered by insurance companies. D)Dow Jones Industrial Average. Do whatever you want with a Learn About Annuities and Their Myths - F&G: fill, sign, print and send online instantly. Sample problems from Chapter 9 . The minimum guaranteed death benefit is provided by that portion of the payment invested in the insurance company's general account. An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are. Changes in payments on a variable annuity correspond most closely to fluctuations in the: 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. D) variable annuities may only be sold by registered representatives. *Under the mortality guarantee, the insurance company assumes mortality risk by guaranteeing payments for life, though the amount of each payment is not guaranteed. 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. *Fixed income instruments, like bonds and fixed annuities, are subject to purchasing power risk. A security is any investment for profit with management performed by a third party. They are also not considered suitable for anyone who anticipates needing a lump sum within a short time frame to fund other endeavors. *Contributions to a nonqualified annuity are made with the owner's after-tax dollars. used for the investment of funds paid by contract holders. A Variable Annuity Has Which of the Following Characteristics A) II and IV. The number of accumulation units can rise 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. You can tailor the income stream to suit your needs. 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.

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