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. An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are. 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. D) I and IV C) 3800. Ideally they should be funded with readily available cash rather than using funds liquidated from existing investments. D) a minimum of 10 years of variable payments, followed by additional variable payments for life A)equity funds. 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: 12.1.4 in the License Exam. A)I and IV. B)II and III. All of the following are true about annuities EXCEPT: they have all the same characteristics as life insurance. Her intent was to use the funds for the down payment on a house after graduation. Anthony Battle is a CERTIFIED FINANCIAL PLANNER professional. This describes which of the following annuities? B)corporate stock. A 45-year-old employed individual with no other retirement accounts in place A) I and II *Payments from a variable annuity depend on the securities' value in the separate account's underlying investment portfolio. A) 2800. Designed to protect against inflation. *The minimum guaranteed death benefit is provided by that portion of the payment invested in the insurance company's general account. 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. *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. Salaries:SalessalariesWarehousesalariesOfficesalaries$670,000110,000234,000$1,014,000Deductions:IncometaxwithheldSocialsecuritytaxwithheldMedicaretaxwithheldU.S. C)It will be higher. D) I and III. C) payments continue for a pre-determined period of time. Annuities | FINRA.org While there is no guarantee on how investments in the separate account will perform, depending on its investment performance, the separate account could provide for a larger death benefit than the minimum guaranteed amount. 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? C) I and III. D) the payout plans provide the client income for life. Assuming that the payroll for the last week of the year is to be paid on December 313131, journalize the following entries: Suggesting that loans or drawing equity from a home to fund VA contracts have also been targeted as abusive sales practices. An annuity payment is the dollar amount of the equal periodic payment in an annuity environment. \end{array} III) A hierarchy of corporate staff evaluates divisions' plans and performance. Usually the term "annuity" relates to a contract between an individual and a life insurance company. used for the investment of funds paid by contract holders. 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. The figure below illustrates a six-month annuity with monthly payments. When money is deposited into the annuity, it is purchasing accumulation units. When the contract is annuitized, the annuitant is credited with a fixed number of annuity units. Fixed Annuity, Retirement Annuities: Know the Pros and Cons. A) It will be higher. 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: Variable annuities gave buyers a chance to benefit from rising markets by investing in a menu of mutual funds offered by the insurer. 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. You purchase a variable annuity contract by making either a single purchase payment or a series of purchase payments. 8 annuities provide a guaranteed rate of return, whereas annuities provide conservative to aggressive investments whose rates of return are not guaranteed. The annuitized payments are viewed for tax purposes as 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. 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? Future annuity payments will vary according to the separate account's performance. These contracts come with high surrender charges. C) 3000. C)The entire $10,000 is taxable as ordinary income. B) accumulation units. D) be paid to the issuing company to complete the plan. 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. The number of variable annuity accumulation units can rise during the accumulation period when additional units are being purchased. As of March 03, 2023, had a relative dividend yield of % compared to the industry median of %. The separate account performance compared to last month's performance. The wage for applicants for this position is $45,979.00 per year. He wants to ensure that the client, in addition to meeting suitability requirements, is aware of certain variable annuity contract characteristics. A 58-year-old individual near retirement who is in good health and anticipates a lengthy retirement The beneficiary is taxed at ordinary income rates during the year the lump sum is received. a. IV. 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. Once a variable annuity has been annuitized: A separate account will invest in a number of different securities. C)Corporate bonds. 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. If this client is in the payout phase, how would his April payment compare to his March payment? C)the yield is always higher than bond yields. guarantees payments for a certain period of time. C) III and IV. Clusters of vesicles in various stages. C)3800. The owner of a life annuity with 10-year period certain will receive payments for life, subject to a minimum of 10 years. Variable annuity salespeople must be registered with FINRA and the state insurance department. Which of the following statements is not true about the characteristics of a trend? Refinancing a home to draw out equity has been identified by FINRA as an abusive sales tactic regarding the sales of VAs. A)number of annuity units. a. it performs a single task b. it is self-contained and independent of other modules c. it is relatively short d. all of the above are chamcleristics of a program module 7. *A periodic payment immediate annuity is a contradiction in terms. B)cost of living. Variable Annuities. A)There is no tax as the withdrawal is considered return of capital. A registered representative explaining variable annuities to a customer would be CORRECT in stating that: Deal with mathematic Math is all about solving equations and finding the right answer. Your client owns a variable annuity contract with an AIR of 4%. How to Rollover a Variable Annuity Into an IRA. They offer broad diversification in the securities market and potential growth, all while using the power of tax deferral. A) changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. must be filed with FINRA. It was a lump-sum purchase. D)Any tax due is deferred. who needs access to the sum invested at later time. None of the other investments listed here offer tax-deferred growth. A)the yield is always higher than mortgage yields. Determine whether the following events are independent or dependent. Annuities due are a type of annuity where payments are made at the beginning of each payment period. Based only on these facts, the variable annuity recommendation is B) It will be lower. Variable annuity salespeople must register with all of the following EXCEPT: A) FINRA. C) II and IV. B)I and IV. can be sold by someone with only an insurance license In March, the actual net return to the separate account was 8%. 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. A joint life with last survivor annuity: If the owner of a variable annuity dies during the accumulation period, any death benefit will: C) insurance guarantee. Random withdrawals do not guarantee how long the money will last because large withdrawals can deplete the funds before the annuitant dies. C) II and IV. 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. *The number of variable annuity accumulation units can rise during the accumulation period when additional units are being purchased. C) the client assumes the investment risk. Chapter 4: Annuities Flashcards | Chegg.com C) 10 years of variable payments. The original investment has grown to a value of $60,000. B) a variable annuity contract is not required to be sold by prospectus because it is an insurance contract A 32-year-old with a company-sponsored 401k plan who will need a lump sum soon to finance graduate school tuition A) II and III. For example, if the income is monthly, the first payment comes one month after the immediate annuity is bought. can be sold by someone with only an insurance license A variable annuity is a security and must be registered with the SEC, not FINRA. A) periodic payment immediate annuity. 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. B) Life annuity with period certain Her intent was to use the funds for the down payment on a house after graduation. Can I Borrow from My Annuity for a House Down Payment? How does an indexed annuity differ from a fixed annuity? Question #46 of 48Question ID: 606796 PGIM Fixed Income has over $900 billion in assets under management across a broad array of fixed . Consequently, the client pays taxes only on the growth portion of the withdrawal ($10,000). U.S. Securities and Exchange Commission. C)Mortality risk. A) Life-only annuity *The accumulation period of a variable annuity may continue for many years. He originally invested $29,000 4 years ago; it now has a value of $39,000. The number of annuity units is fixed at the time of annuitization. D)Investment risk. A registered representative's (RR) customer is speaking of a variable life insurance contract he owns. During the . Reference: 12.2.1 in the License Exam. I. Determine the revenue equation given the profit and expense equations. Similarly, CDs are insured, thereby eliminating risk and guaranteeing a return. 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. This chapter was updated on 15 December, 2005. A trend is formed from non-repetitive actions of people. *During the payout period, payments are based on a fixed number of annuity units established when the contract was annuitized. Over the past five years, 's dividend yield has averaged % per year. B) During the accumulation period. B)I and III. 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. No Hibernation for Issuers of Index-Linked Variable Annuities and Index The accumulation period of a variable annuity may continue for many years. Her agent recommended she choose a variable annuity as a safe haven for the funds. Question #12 of 48Question ID: 606814 A client has purchased a nonqualified variable annuity from a commercial insurance company. Annuities are similar to other forms of investing in that the owner invests money with the hope that it will gain in value, but annuities also come with higher fees than most mutual funds. Question #37 of 48Question ID: 606817 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. D) II and IV. Based on this information the RR should: *A joint life with last survivor contract covers multiple annuitants and ceases payments at the death of the last surviving annuitant. a variable annuity does not guarantee payments for life. However, it does guarantee payments for life (mortality). If your customer invests in a variable annuity and chooses to annuitize at age 65, which of the following statements are TRUE? B)Variable annuities. D)A 10% penalty plus the payment of ordinary income tax on funds withdrawn in excess of the owner's basis. This recommendation is: However, the web version (cat. B) with guaranteed minimum withdrawal benefits (GMWBs) the periodic payments can be monthly, quarterly or annually With a fixed annuity, by contrast, the insurance company assumes the risk of delivering whatever return it has promised. Which of the following is not characteristic of a fixed annuity? "Variable Annuities: What You Should Know," Page 3. B) Life annuity. A) Dow Jones Industrial Average. 7 - Annuities Flashcards | Quizlet There is no clear answer to this. B) II and III B)4200. For this potential advantage, the investor, rather than the insurance company, assumes the investment risk. An accumulation unit in a variable annuity contract is: The entire amount is taxed as ordinary 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. What type of annuity has a cash value that is based upon the performance of it's underlying investment funds? Chapter 7: Annuities Flashcards | Quizlet You can learn more about the standards we follow in producing accurate, unbiased content in our. D)the state insurance department. D)variable annuities. a. This cloud model is composed of five essential characteristics, three service models, and four deployment models. D) I and IV. An annuitant assumes the investment risk of a variable annuity and is not protected by the insurance company from capital losses. Classifying annuities There are many categories of annuities. Solved Which of the following is characteristic of variable - Chegg There are two elements that contribute to the value of a variable annuity: the principal, which is the amount of money you pay into the annuity, and the returns that your annuitys underlying investments deliver on that principal over the course of time. Of the four client profiles below which might be the best suited for a variable annuity recommendation? Variable annuity Which of the following is characteristic of fixed annuities? The payout of an annuitized variable annuity account changes from month to month in a manner determined by which of the following? 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. d. Each month the payment will increase, decrease, or remain the same as the previous month's payment . Which of the following recommendations would best meet the customer profile? B)I and III. What are the characteristics of annuity? - Wise-Answers C) 10% penalty plus payment of ordinary income tax on all funds withdrawn exceeding basis. C) none of these. C) taxed as ordinary income only to the extent of earnings. 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 There are two interest rates under fixed annuities. The accumulation unit's value is used to calculate the total value of the account. D) A 50 year old individual with $50,000 cash to invest who has already made the maximum contributions to an IRA and the 401(k) plan at his place of employment and would like to minimize some of the tax consequences of his currently high tax bracket. C)III and IV. All of the following statements regarding variable annuities are true EXCEPT: An annuity may be purchased under all of the following methods EXCEPT: C) II and IV. Reference: 12.3.3 in the License Exam, Question #34 of 48Question ID: 606834 A) mutual fund units. II) It has an internal capital market wherein each division competes for funds. \hspace{10pt} \text{Warehouse salaries} & 110,000 & \hspace{10pt} \text{Social security tax withheld} & 51,714\\ A)accumulation shares. Question #16 of 48Question ID: 606807 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.
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