An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are. 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. 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 insurance company. B) contact the issuer of the clients existing VA contract to facilitate the clients surrender of the contract. Sub accounts and mutual funds are conceptually. This role is also eligible for annual short-term incentive compensation. How to Navigate Market Volatility While Saving for Retirement, Variable Annuity: Definition and How It Works, Vs. When the annuitization option is selected, each payment represents both capital and earnings. *Contributions to a nonqualified variable annuity are not tax deductible. D)variable annuities. Once the cost basis is reached, any further withdrawals are a nontaxable return of principal. Because the client is older than age 59-, he does not pay 10% premature distribution penalty tax. D)It cannot be determined until the April return is calculated. If one purchases an annuity for a set price, the issuing company would invest the funds and hold them until they are supposed to be disbursed, generally based on the owner's age. 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 D) I and III. B)100% taxable. Which of the following statements is not true about the characteristics of a trend? A) It will be higher. C) Age 40, currently unemployed The downside was that the buyer was exposed to market risk, which could result in losses. 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. Reference: 12.1.2 in the License Exam, Question #39 of 48Question ID: 721469 *Accumulation units represent units of ownership in a life insurance company's separate account when the contract is in the accumulation stage. A prospectus for a variable annuity contract: A universal variable life policy should be purchased primarily for its insurance features, not its investment features. 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. A)Purchasing power risk. C)such an annuity is designed to combat inflation risk. 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: 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. Suppose that 20%20 \%20% of their users are United States users who log on daily. "Variable Annuities: What You Should Know," Page 10. None of the other investments listed here offer tax-deferred growth. Income that cannot be outlived by the owner A)IPO. Investopedia requires writers to use primary sources to support their work. If this client is in the payout phase, how would his April payment compare to his March payment? Consequently, the client pays taxes only on the growth portion of the withdrawal ($10,000). An investor who purchases a fixed annuity contract assumes purchasing-power risk. The value of a variable annuity is based on the performance of an underlying portfolio of sub accounts selected by the annuity owner. Variable annuities were introduced in the 1950s as an alternative to fixed annuities, which offer a guaranteedbut often lowpayout during the annuitization phase. 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. These contracts come with high surrender charges. The tax on this is $2,800 ($10,000 x 28%). These include white papers, government data, original reporting, and interviews with industry experts. Variable Annuity Advantages and Disadvantages, Guide to Annuities: What They Are, Types, and How They Work. A) Age 56, available cash to invest, makes the maximum retirement plan contributions to an existing IRA and 401(k) plan The features of variable deferred annuities are many. A) waiver of premium Question #27 of 48Question ID: 606818 variable annuity without paying tax at the time of the transfer. Licensed to sell Variable Annuities in the following state(s): FL, TX . Full-Time. C) early annuity phase-in This guideline has been prepared for use by Federal agencies. C)not suitable because a lifetime income rider is only for someone who is already retired A) Age 56, available cash to invest, makes the maximum retirement plan contributions to an existing IRA and 401(k) plan Life Insurance vs. Annuity: What's the Difference? 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. 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. B)fixed in value until the holder retires. savingsbonds30,420Groupinsurance45,630$341,718\begin{array}{lrlr} Question #20 of 48Question ID: 606808 A) I and III. The annuitant may not contribute and withdraw simultaneously. C) II and III. During the payout period, payments are based on a fixed number of annuity units established when the contract was annuitized. C) Corporate bonds. C) I and III. The creation of an estate. no. Essential Characteristics: *During the accumulation phase, the number of accumulation units will increase as additional money is invested. 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. A) not suitable B)I and III. A variable annuity is just a tax-deferred annuity in which you get to choose how the value of the annuity is invested. required to be located off of the company's premises. D) I and II. Distributed along a dermatome. 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. *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. B)Variable annuities. A)accumulation shares. D)the safety of the principal invested. C)Keogh plans. *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. Anthony Battle is a CERTIFIED FINANCIAL PLANNER professional. Reference: 12.3.2.4 in the License Exam. A)Fixed annuity contract with a discussion regarding purchasing power risk D)Investment risk. The upside was the possibility of higher returns during the accumulation phase and a larger income during the payout phase. D) There is no guarantee regarding the investment results of the separate account. *Universal variable life policies are insurance company products that should be purchased primarily for the insurance features they offer rather than as an investment. In the case of deferred annuities, this is often referred to as the accumulation phase. Describe. A registered representative recommends a variable annuity with an income rider to a client. A) complete all paper work to purchase the annuity contract and obtain the clients signature immediately. ($5,000) to a stock fund. B)It will be lower. 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. What is the annual cash flow generated from the new machine? 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. The company's well-known Rock symbol is an icon of strength, stability, expertise and innovation that has stood the test of time. C) 100% tax free. The holder of a variable annuity receives the largest monthly payments under which of the following payout options? The beneficiary is taxed at ordinary income rates during the year the lump sum is received. D) I and IV. D)I and III. Your client has $50,000 to invest. D)an accounting measure used to determine payments to the owner of the variable annuity. How to Rollover a Variable Annuity Into an IRA. *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. What Are Ordinary Annuities, and How Do They Work (With Example)? B) variable annuities. Question #37 of 48Question ID: 606817 A)It will stay the same. 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. 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. Given that all of the current retirement investments are subject to market risk, the customer wants these new funds to have no market risk exposure. Facebook reports that 70%70 \%70% of their users are from outside the United States and that 50%50 \%50% of their users log on to Facebook daily. D) 100% tax deferred. C) II and IV. 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. Your client has a large sum of money to invest from the proceeds of the sale of his home. Reference: 12.1.2 in the License Exam. The investor has already paid tax on the contributions but the earnings have grown tax-deferred. have investment risk that is assumed by the investor Her intent was to use the funds for the down payment on a house after graduation. D)suggest to the client that perhaps a loan or refinancing his vacation home might be a better way to fund the contract purchase. The return on a variable annuity is not guaranteed; it is determined by the underlying portfolio's value. A)II and IV. A customer is receiving annuitized payments from a variable annuity. A) Ordinary income tax on earnings exceeding basis. Do homework Doing homework can help you learn and understand the material covered in class. Of the 4 client profiles below, which might be the best suited for a variable annuity recommendation? C) single payment immediate annuity. A 1 The applicant and possibly the agent initial any changes made. covers more than one person. An individual retirement annuity is an investment vehiclesimilar to an individual retirement accountthat is offered by insurance companies. All of the following statements regarding variable annuities are true EXCEPT: Reference: 12.1.2 in the License Exam. Question #40 of 48Question ID: 606800 & \underline{\underline{\$1,014,000}} & \hspace{10pt} \text{U.S. savings bonds} & 30,420\\ A) Life-only annuity Fixed annuities are not considered securities as return is guaranteed by the insurance company issuer. The separate account is NOT likely to invest in: IV. Suggesting that loans or drawing equity from a home to fund VA contracts have also been targeted as abusive sales practices. Your 65-year-old client owns a nonqualified variable annuity. an annuitant lives longer than expected. A prospectus for a variable annuity contract: When a partial withdrawal is made from an annuity, the earnings are considered to be taken out first for tax purposes (or LIFO). An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are. D)I and III. A) Fixed Annuity IBM is a global brand and has its presence in 170 countries and operates . The fixed payment that the annuitant receives loses purchasing power over time as a result of inflation. B) Life annuity. is required by the Securities Act of 1933. Variable annuities operate in similar ways to . If an investor has purchased an immediate variable annuity, which of the following statements best describe the investment? A) mutual fund units. Of the answer choices given the best would be to reevaluate the recommendation based on the new information tendered by the client. Inflation-hedging, using both tax deferral combined with market growth potential, is made possible by variable annuities #. The value of these units varies with the performance of the separate account. national origin, genetics, disability, age, veteran status, or any other characteristic protected by law. A variable annuity is both an insurance and a securities product. The following changes have been incorporated into Special Publication 800145, as of the date indicated - . If you need to withdraw money from the account because of a financial emergency, you may face surrender fees. 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) changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. A) The entire amount is taxed as ordinary income, because it is not life insurance. Based only on these facts, the variable annuity recommendation is 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. *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. C)complete all paper work to purchase the annuity contract and obtain the clients signature immediately. C)I and IV. Sample problems from Chapter 9 . Variable annuities gave buyers a chance to benefit from rising markets by investing in a menu of mutual funds offered by the insurer. D)each annuity unit's value is fixed, but the number of annuity units varies with time. (The exception is the fixed income annuity, which has a moderate to high payout that rises as the annuitant ages). Reference: 12.2.1 in the License Exam. An annuity is an agreement for one person or organization to pay another a series of payments. Question #42 of 48Question ID: 606830 B)corporate stock. B) Life annuity with period certain B) allow customers to opt out of sharing of financial information with certain nonaffiliated firms.