All of the following statements regarding variable annuities are true EXCEPT: Question #11 of 48Question ID: 606816 B)Universal variable life policy. The annuity unit's value represents a guaranteed return. must precede every sales presentation. must be filed with FINRA. An annuity factor is taken from the annuity table, which considers, for example, the investor's sex and age. An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are Get Started. The company's well-known Rock symbol is an icon of strength, stability, expertise and innovation that has stood the test of time. Immediate life annuity with 10-year period certain. A separate account will invest in a number of different securities. 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. When the first party dies, the annuity payment is made to the survivor. A)II and IV. In addition, if the customer is not at least 59-, there will be a tax penalty of an additional 10%. To comply with Regulation SP, a brokerage firm is required to do all of the following EXCEPT: A) deliver an annual notice of its information collecting and sharing policies to all customers. The investor has already paid tax on the contributions but the earnings have grown tax-deferred. Surrender fees and penalties for early withdrawal. C) Corporate bonds. Contributions to a nonqualified annuity are made with the owner's after-tax dollars. 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. have investment risk that is assumed by the investor The client's investment objectives, tax bracket, investment experience and risk tolerance all align well with a VA recommendation. An annuitant assumes the investment risk of a variable annuity and is not protected byt he insurance company from capital losses. A) mortality guarantee. A 3 b) What probability is the 20%20 \%20% mentioned above? 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. Reasonable accommodations may be made to enable individuals with disabilities to perform the essential functions. A)II and IV. They offer broad diversification in the securities market and potential growth, all while using the power of tax deferral. a variable annuity guarantees an earnings rate of return. Variable annuities gave buyers a chance to benefit from rising markets by investing in a menu of mutual funds offered by the insurer. A prospectus for a variable annuity contract: Sample problems from Chapter 9. . A) I and IV. As with most retirement account options, withdrawals before the age of 59 will result in a 10% tax penalty. Portfolio Compliance Risk Analyst Job in Newark, NJ at Prudential Reference: 12.3.3 in the License Exam. The figure below illustrates a six-month annuity with monthly payments. Who assumes the investment risk in a variable annuity contract? A) Any tax due is deferred. An annuity is an agreement for one person or organization to pay another a series of payments. B) Municipal 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 dissolutions of the trust for distributing income and capital gains. A customer has contributed $1,000 a year for 10 years to his tax-deferred nonqualified variable annuity. The value of the separate account is now $30,000. A variable annuity does not guarantee an earnings rate because earnings will depend on the performance of the separate account. 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 *Insurance companies introduced the variable annuity as an opportunity to keep pace with inflation. This recommendation is: Solved 6. Which of the following is not a characteristic of | Chegg.com B)I and III. Fixed annuities typically earn at a lower, stable rate. The separate account performance compared to last month's performance. *A variable annuity does not guarantee an earnings rate because earnings will depend on the performance of the separate account. Variable annuities provide protection from inflation because their monthly income can increase depending on the separate account's performance. All of the following statements concerning a variable annuity are correct EXCEPT: Both products typically have a wide range of options across equities, bonds and money market instruments. The annuity unit's value represents a guaranteed return. the agent must be licensed in both insurance and securities. C) value of underlying securities held in the separate account. A) partially a tax-free return of capital and partially taxable. A joint life with last survivor annuity: D)Variable annuity. When the annuitization option is selected, each payment represents both capital and earnings. *Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. Your customer is interested in a variable annuity but is unclear on some of the details regarding different specifications and riders that can be attached to the contract. regulated under both securities and insurance laws. B)a minimum rate of return is guaranteed. This includes transportation, food, lodging, and entertainment. B) value of annuity units. An individual retirement annuity is an investment vehiclesimilar to an individual retirement accountthat is offered by insurance companies. Chapter 7: Annuities Flashcards | Quizlet 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? C)Variable annuity contract with a discussion regarding interest rate risk C) 3800. An accumulation unit in a variable annuity contract is: C) II and IV. national origin, genetics, disability, age, veteran status, or any other characteristic protected by law. Reference: 12.1.1 in the License Exam. D)the rate of return is determined by the underlying portfolio's value. For an insurance company, mortality risk turns out unfavorably if: B) 100% taxable. a variable annuity does not guarantee payments for life. 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. C) suggest to the client that perhaps a loan or refinancing his vacation home might be a better way to fund the contract purchase. *The accumulation period of a variable annuity may continue for many years. Since , has paid out quarterly dividends ranging from $0.00 to $0.00 per share. 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 D)I and III. The number of annuity units is fixed. A) I and IV. An Immediate Annuity is designed to provide each of the following features, EXCEPT: The creation of an estate. If this client is in the payout phase, how would his April payment compare to his March payment? 11.1: Fundamentals of Annuities - Mathematics LibreTexts A joint-and-last-survivor annuity is a payout option where: A. B) 0. B) The investor's marital status. The income was deferred from tax over the plan's life, so it is taxable as ordinary income once distributed. Distribution of dividends occurs during the accumulation period. Variable Annuities Flashcards - Cram.com B) Life annuity. Reference: 12.1.2 in the License Exam. ($5,000) to a stock fund. A 45-year-old investor takes a lump-sum distribution from a nonqualified variable annuity. The paper publication will not be rereleased. Question #28 of 48Question ID: 606821 For example, when paying rent, the rent payment (PMT) . You can buy an annuity with either a lump sum or a series of payments, and the accounts value will grow accordingly. Reference: 12.3.2.1 in the License Exam. Reference: 12.2.1 in the License Exam. A client has purchased a nonqualified variable annuity from a commercial insurance company. Contributions to an IRA may be tax deductible, depending on the individual's earnings and participation in a company-sponsored qualified retirement plan. *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. In a variable annuity contract, the provision that guarantees the annuitant payments for life is called the: The investor has already paid tax on the contributions but the earnings have grown tax-deferred. Post navigation Annuities basics | III C)100% tax deferred. It was a lump-sum purchase. A variable annuity is both an insurance and a securities product. C)number of accumulation units. 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. If an investor has a fixed-annuity contract with an insurance company, which of the following risks is assumed by the investor? D) I and II. C)It will be higher. B) Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. A) a minimum rate of return is guaranteed. They are more suitable for individuals who can fund the annuity with cash, want to supplement existing retirement benefits they have already funded, are comfortable with the market risk associated with a VA separate account portfolio and anticipate a long retirement. B) A 30 year old construction worker recently unemployed who wants to invest his severance pay amounting to 9 months salary. Distributions from such an annuity are computed on a LIFO basis with the income taxed first. B)I and IV. Ideally they should be funded with readily available cash rather than using funds liquidated from existing investments. C) taxed as ordinary income only to the extent of earnings. D)the state insurance department. Annuity death benefits are generally paid in a lump sum. A) not suitable When money is deposited into the annuity, it is purchasing accumulation units. When the second party dies, all payments cease. A) II and IV. B)variable annuities are classified as insurance products. B) Exchange traded Funds (ETFs) or Exchange traded Notes (ETNs) Practice all cards. During the accumulation phase, the number of accumulation units will increase as additional money is invested. III. The AG49-A Revisions B) taxed as ordinary income. a variable annuity guarantees an earnings rate of return. A customer has a nonqualified variable annuity. C) the client assumes the investment risk. D) 4200. C) II and IV. Contributions to a nonqualified variable annuity are not tax deductible. A) III and IV. The minimum guaranteed death benefit is provided by that portion of the payment invested in the insurance company's general account. 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 D) Joint and last survivor annuity. Investopedia does not include all offers available in the marketplace. A) 4000. The correct answer was: partially a tax-free return of capital and partially taxable. B)Life annuity with period certain. *A joint life with last survivor contract covers multiple annuitants and ceases payments at the death of the last surviving annuitant. A) two people are covered and payments continue until the second death. *Payments from a variable annuity depend on the securities' value in the separate account's underlying investment portfolio. An annuity factor is taken from the annuity table, which considers, for example, the investor's sex and age. C)Mortality risk. D)with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed, 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. The value of these units varies with the performance of the separate account. C)Life annuity. C)earnings only and taxable B)II and III. A) Fixed annuities. How is the distribution taxed? C)Keogh plans. A customer is receiving annuitized payments from a variable annuity. The wage for applicants for this position is $45,979.00 per year. D) Variable annuity. D) Variable annuities. D) the yield is always higher than mortgage yields. must precede every sales presentation. EEO IS THE LAW . C) II and III. How does an indexed annuity differ from a fixed annuity? 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. Vaccine has decreased the incidence. Your client owns a variable annuity contract with an AIR of 4%. Payments from a variable annuity depend on the securities' value in the separate account's underlying investment portfolio. A) periodic payment immediate annuity. A) periodic payment immediate annuity. A) It will be higher. A) Ordinary income tax on earnings exceeding basis. D) Age 27, saving for first home. An investor who purchases a fixed annuity contract assumes purchasing-power risk. C) II and IV. Any withdrawals you make prior to the age of 59 may also be subject to a 10% tax penalty. 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. Explain what is meant by positive and negative *The number of variable annuity accumulation units can rise during the accumulation period when additional units are being purchased. Nicks Enterprises has purchased a new machine tool that will allow the company to improve the efficiency of its operations. IBM is a global brand and has its presence in 170 countries and operates . Uses in Investing, Pros, and Cons, Indexed Annuity: Definition, How It Works, Yields, and Caps. *Fixed income instruments, like bonds and fixed annuities, are subject to purchasing power risk. You can tailor the income stream to suit your needs. C)III and IV. The number of annuity units is fixed at the time of annuitization. These contracts cover both lives and will continue to make payments until the last spouse dies. *Once a variable annuity is annuitized, the accumulation units are converted into a fixed number of annuity units. 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? Deal with mathematic Math is all about solving equations and finding the right answer. The creation of an estate. 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. An important basic characteristic of common stocks that makes them a suitable type of investment for the separate account of variable annuities is: D) A 10% penalty plus the payment of ordinary income tax on funds withdrawn in excess of the owner's basis. A) Life-only annuity They are also not considered suitable for anyone who anticipates needing a lump sum within a short time frame to fund other endeavors. Once a variable annuity has been annuitized: Which of the following recommendations would best meet the customer profile? If the contract holder dies before the period expires, the remaining payments are made to the beneficiary. D)I and III. Contributions to an IRA may be tax deductible, depending on the individual's earnings and participation in a company-sponsored qualified retirement plan. The tax on this amount is $3,000. Reference: 12.3.4 in the License Exam. d. Each month the payment will increase, decrease, or remain the same as the previous month's payment . A variable annuity is a security and must be registered with the SEC, not FINRA. Reference: 12.3.1 in the License Exam, Question #30 of 48Question ID: 606833 8 annuities provide a guaranteed rate of return, whereas annuities provide conservative to aggressive investments whose rates of return are not guaranteed. Variable annuities must be registered with: 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 The amount taxed is the amount of the lump-sum payment minus the deceased's cost basis in the investment. Unit 12: Variable Annuities Flashcards | Chegg.com A)Fixed annuity contract with a discussion regarding purchasing power risk Reference: 12.1.2.1.1. in the License Exam. A)number of annuity units. D)II and III. Designed to protect against inflation. Each of the remaining statements are true. C) with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed But again, the need to designate beneficiaries is not an issue for this annuitant. B)value of annuity units. C)the number of annuity units is fixed, and their value remains fixed. Question #45 of 48Question ID: 606795 C)complete all paper work to purchase the annuity contract and obtain the clients signature immediately. I. A variable annuity is a combination of 2 products: an insurance contract and a mutual fund. The holder of a variable annuity receives the largest monthly payments under which of the following payout options? B)I and II A customer has an investment objective of keeping pace with inflation while assuming moderate risk.