a variable annuity has which of the following characteristics

Reference: 12.1.4.2 in the License Exam. What will this transaction provide? When the first party dies, the annuity payment is made to the survivor. Every annuity has some characteristics in common. *With guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is not guaranteed because payments stop when the annuitant has received an amount equal to the principal account value or the contract term ends. an annuitant lives longer than expected. *A variable annuity does not guarantee an earnings rate because earnings will depend on the performance of the separate account. a life insurance holder dies sooner than expected. The growth portion is subject to a 10% penalty. Question #41 of 48Question ID: 606801 vote for the investment adviser. C) suggest to the client that perhaps a loan or refinancing his vacation home might be a better way to fund the contract purchase. who needs access to the sum invested at later time. The fees on variable annuities can be quite hefty. Reference: 12.3.2.4 in the License Exam. C)complete all paper work to purchase the annuity contract and obtain the clients signature immediately. About Us 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 explaining variable annuities to a customer would be CORRECT in stating that: The paper publication will not be rereleased. B)suitable regardless of funding sources D) The fact that periodic payments into the contract may increase or decrease. 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. This factor is used to establish the dollar amount of the first annuity payment. Your client has $50,000 to invest. Classifying annuities There are many categories of annuities. However, a discussion should occur regarding the risks that are associated with a fixed annuity; purchasing power risk. 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 variable annuity's separate account is: 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. Vaccine has decreased the incidence. This makes a total of $4,000 tax and penalty paid on the random withdrawal. Immediate life annuity with 10-year period certain. B. A) mutual fund units. Since , has paid out quarterly dividends ranging from $0.00 to $0.00 per share. b) What probability is the 20%20 \%20% mentioned above? D) tax free. 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. II. However, at the end of the period certain the payments to the named beneficiary (the spouse) will stop. Are Variable Annuities Subject to Required Minimum Distributions? U.S. Securities and Exchange Commission. 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. 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. A. When money is deposited into the annuity, it is purchasing accumulation units. C) payments continue for a pre-determined period of time. a variable annuity does not guarantee payments for life. 's dividend yield was % last year. a variable annuity guarantees payments for life. C)Money market fund. A) II and III. A) A variable annuity no. When the second party dies, all payments cease. C)I and IV. In March, the actual net return to the separate account was 8%. B)value of annuity units. A variable annuity is both an insurance and a securities product. None of the other investments listed here offer tax-deferred growth. Similarly, CDs are insured, thereby eliminating risk and guaranteeing a return. C) insurance companies keep variable annuity funds in separate accounts from other insurance products. D)Any tax due is deferred. B)Tax-free municipal bonds An annuitant assumes the investment risk of a variable annuity and is not protected byt he insurance company from capital losses. Question #13 of 48Question ID: 606822 A) The fact that the annuity payment may increase or decrease. *Distributions from a nonqualified plan represent both a return of the original investment made in the plan with after-tax dollars (a nontaxable return of capital) and the income from that investment. must be filed with FINRA. Consequently, the client pays taxes only on the growth portion of the withdrawal ($10,000). C)III and IV He originally invested $29,000 4 years ago; it now has a value of $39,000. A) I and III. He makes the following four statements, all of which are true EXCEPT Instructions\textsf{\textcolor{#4257b2}{Instructions}}Instructions Which of the following are defined as securities? During the accumulation phase, the number of accumulation units will increase as additional money is invested. Reference: 12.1.2.1.2 in the License Exam. Once the cost basis is reached, any further withdrawals are a nontaxable return of principal. D)money market funds. An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are. C) I and IV. *Variable annuity contracts were devised to help investors keep pace with inflation. 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) II and III. C) Life annuity with period certain. Herpes Zoster has all of the following characteristics except: Group of answer choices. The number of accumulation units is always fixed throughout the accumulation period. C)suitable due to the death benefit features of a variable annuity. His objective is monthly income that he can receive after he retires to supplement his small pension and social security benefits. Practice all cards. How is the distribution taxed? must precede every sales presentation. B) a variable annuity contract is not required to be sold by prospectus because it is an insurance contract Which of the following statements regarding variable annuities are TRUE? Reference: 12.1.2 in the License Exam, Question #39 of 48Question ID: 721469 A separate account will invest in a number of different securities. Prudential Retirement Security Annuity VI is a group variable annuity (GVA) issued by Prudential Retirement Insurance and Annuity Company (PRIAC) which utilizes a Separate Account offered When a partial withdrawal is made from an annuity, the earnings are considered to be taken out first for tax purposes (or LIFO). For an investor, which of the following is the most important factor in determining the suitability of a variable annuity investment? D)suitable due to the relative safety of the investment. Before the contract is annuitized, your client, currently age 60, withdraws some funds for personal purposes. D) I and III. B)II and III. A)Fixed annuity contract with a discussion regarding purchasing power risk Surrender fees and penalties for early withdrawal. 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? These include white papers, government data, original reporting, and interviews with industry experts. A)It will stay the same. C) II and III. C)prime rate. Sample problems from Chapter 9 . Of the four client profiles below which might be the best suited for a variable annuity recommendation? The $30,000 contract value represents $10,000 of contributions and $20,000 of earnings. 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) payments continue until age 70-. The minimum guaranteed death benefit is provided by that portion of the payment invested in the insurance company's general account. A)II and IV. Question #35 of 48Question ID: 606810 For a retired person, which of the following investments would provide the greatest protection against inflation? D)Variable annuity contract with a discussion regarding legislative risk, A VA with its investments in the separate account subject to market risk would not align with the customer's objective. Question #28 of 48Question ID: 606821 Transcribed image text: 6. Over the following year, the stock fund has a 10% return, and the bond fund has a 5% return. C)II and IV. C) with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed A) Age 56, available cash to invest, makes the maximum retirement plan contributions to an existing IRA and 401(k) plan C) Unit refund life option Variable annuities operate in similar ways to . For example, if the income is monthly, the first payment comes one month after the immediate annuity is bought. Based on the clients profile which of the following would be the best recommendation? A)Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. D) 4200. Reference: 12.1.4.1 in the License Exam. Sub accounts and mutual funds are conceptually. An investor owning which of the following variable annuity contracts would hold accumulation units? This customer has no spouse or dependents, which negates the value of the death benefit. You purchase a variable annuity contract by making either a single purchase payment or a series of purchase payments. 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 45-year-old investor takes a lump-sum distribution from a nonqualified variable annuity. B) with guaranteed minimum withdrawal benefits (GMWBs) the periodic payments can be monthly, quarterly or annually A customer has an investment objective of keeping pace with inflation while assuming moderate risk. Which Earns More: Variable or Fixed Annuities? B) I and III. Reference: 12.1.2 in the License Exam, Question #21 of 48Question ID: 606812 What is the taxable consequence of this withdrawal to your client? B) Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. variable An immediate annuity consists of a Single Premium T has an annuity that guarantees an income payment for the rest of his life. Bear in mind that between the numerous feessuch as investment management fees,mortality fees, and administrative feesand charges for any additional riders, a variable annuitysexpenses can quickly add up. Reference: 12.1.4 in the License Exam. 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. Since the client is older than 59 at the time of distribution, the additional 10% penalty tax is not incurred. C)Variable annuity contract with a discussion regarding interest rate risk 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. B) The death benefit cannot ever be more than the guaranteed benefit. Reference: 12.1.2 in the License Exam. Reference: 12.1.2 in the License Exam. D) Variable annuity. B) During the accumulation period. Accumulation Period of Fixed Annuities During this period, premiums are credited with interest which accumulates on a yearly basis. What Are the Distribution Options for an Inherited Annuity? A)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. If the contract holder dies before the period expires, the remaining payments are made to the beneficiary. B)Two-thirds of the withdrawal is taxable as ordinary income. The payout compared to the initial payout upon annuitization. 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. 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. During the . C) value of underlying securities held in the separate account. Question #33 of 48Question ID: 606832 C)The entire $10,000 is taxable as ordinary income. Of the answer choices given the best would be to reevaluate the recommendation based on the new information tendered by the client. Assuming that the payroll for the last week of the year is to be paid on December 313131, journalize the following entries: B) allow customers to opt out of sharing of financial information with certain nonaffiliated firms. The separate account performance compared to an assumed interest rate. 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 C) the yield is always higher than bond yields. C) II and III. Which of the following is not a characteristic of a program module? A trend makes considerable influence or impact. Therefore, ordinary income taxes will apply to the entire $10,000. *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) II and IV. D) The investment risk is shared between the insurance company and the policyowner. B) Municipal bonds. B)I and II Do whatever you want with a Learn About Annuities and Their Myths - F&G: fill, sign, print and send online instantly. At the end of the year your account has a value of 10750. Fixed income instruments, like bonds and fixed annuities, are subject to purchasing power risk. A) two people are covered and payments continue until the second death. A)100% tax free. The most popular type of variable annuity is a deferred 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. Life income riders are best suited for those who anticipate a lengthy retirement and are generally not yet retired when making the VA purchase. B)a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero Payments from a variable annuity depend on the securities' value in the separate account's underlying investment portfolio. Annuities due are a type of annuity where payments are made at the beginning of each payment period. B) accumulation units. Her intent was to use the funds for the down payment on a house after graduation. III. The number of annuity units varies. Deal with mathematic Math is all about solving equations and finding the right answer. approve changes in the plan portfolio. A variable annuity's separate account is: A separate account will invest in a number of different securities. Generally, a life-only contract pays the most per month because payments cease at the annuitant's death. 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. C) a variable annuity contract does not guarantee any type of return The number of accumulation units can rise during the accumulation period. That can adversely affect your returns over the long term, compared with other types of investments. C) II and IV. A) each annuity unit's value is fixed, but the number of annuity units varies with time. FINRA. Because this is not guaranteed, the policyowner bears the investment risk. If this client is in the payout phase, how would his April payment compare to his March payment? 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. B)Life annuity with period certain. U.S. Securities and Exchange Commission. *A variable annuity is a security and must be registered with the SEC, not FINRA. B) The proceeds minus John's cost basis taxed as ordinary income at Sue's tax rate. D) I and II. You can learn more about the standards we follow in producing accurate, unbiased content in our. A variable annuity has two phases: an accumulation phase and a payout (annuitization) phase. The number of annuity units becomes fixed when the contract is annuitized; it is the value of each unit that fluctuates. The value of these units varies with the performance of the separate account. B)100% taxable. B)a majority vote from the shareholders is required to change the investment objectives. A) II and IV. C) value of underlying securities held in the separate account. C)such an annuity is designed to combat inflation risk. 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. B) life income D)suggest to the client that perhaps a loan or refinancing his vacation home might be a better way to fund the contract purchase. Reference: 12.1.2 in the License Exam. C) taxed as ordinary income only to the extent of earnings. An investor who purchases a fixed annuity contract assumes purchasing-power risk. *Universal variable life policies are insurance company products that should be purchased primarily for the insurance features they offer rather than as an investment. A) Ordinary income tax on earnings exceeding basis. She will receive the annuity's entire value in a lump-sum payment. can be sold by someone with only an insurance license Which of the following is NOT an accurate statement concerning a variable life insurance contract? No, annuities are not FDIC-insured as they are not bank products. Salaries:SalessalariesWarehousesalariesOfficesalaries$670,000110,000234,000$1,014,000Deductions:IncometaxwithheldSocialsecuritytaxwithheldMedicaretaxwithheldU.S. *Once a variable annuity is annuitized, the accumulation units are converted into a fixed number of annuity units. Question #38 of 48Question ID: 606798 III. The accumulation unit's value is used to calculate the total value of the account. A joint life with last survivor annuity: Rolling two 222s followed by one 666 on three tosses of a fair die, Use the table 1 and table 2 to complete the table 3 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? If the customer takes a withdrawal of $10,000, what are the tax consequences? You can buy an annuity with either a lump sum or a series of payments, and the accounts value will grow accordingly. B) II and IV. is required by the Securities Act of 1933. This would not align with the couple's criteria for coverage as long as they both live. A) a variable annuity contract will provide a fluctuating monthly check upon the annuitization of the contract One of the following would achieve that objective but a suitability discussion regarding it's risk should also occur. 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? B) I and III. They are also riddled with fees, which can cut into profits. *The return on a variable annuity is not guaranteed; it is determined by the underlying portfolio's value. A 45-year-old employed individual with no other retirement accounts in place

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