However, because the client is not yet age 59- when making the withdrawal, he also pays a 10% penalty, or $1,000. II) It has an internal capital market wherein each division competes for funds. Among annuities, variable annuities differ from fixed annuities, which provide a specific and guaranteed return. C) with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed C)III and IV A)II and IV. B) Exchange traded Funds (ETFs) or Exchange traded Notes (ETNs) Variable annuity salespeople must be registered with FINRA and the state insurance department. A) Fixed annuities. B)I and III. Reference: 12.1.4 in the License Exam. 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. *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. D)I and II. no. This recommendation is: Reference: 12.3.2.1 in the License Exam. *Contributions to a nonqualified variable annuity are not tax deductible. A) I 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. Annuities due are a type of annuity where payments are made at the beginning of each payment period. A)Joint tenants annuity. d. Each month the payment will increase, decrease, or remain the same as the previous month's payment . A security is any investment for profit with management performed by a third party. The growth portion is taxed as ordinary income. & \underline{\underline{\$1,014,000}} & \hspace{10pt} \text{U.S. savings bonds} & 30,420\\ 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. A)It will stay the same. Of the 4 client profiles below, which might be the best suited for a variable annuity recommendation? C) Mutual fund portfolio consisting of blue chip stocks *Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. A)2800. A) I and III. C)suitable due to the death benefit features of a variable annuity. have investment risk that is assumed by the investor A variable annuity's separate account is: A separate account will invest in a number of different securities. As part of the registration requirements, a prospectus must be filed and distributed to prospective investors. D)separate account may consist of mutual funds. A) Capital gains taxation on the earnings withdrawn in excess of the owner's basis. The growth portion is taxed as a capital gain. 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. Variable annuity salespeople must register with all of the following EXCEPT: A) FINRA. An investor who has purchased a nonqualified variable annuity has the right to: Based on this information the RR should: A) A 75 year old women, who is a former executive retired for over ten years who wants to preserve as much capital as she can to leave to her two grandchildren. All of the following characteristics are shared by both a mutual fund and a variable annuity's separate account EXCEPT: Only variable annuities have payout plans that provide the client income for life. Post navigation 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. 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. C) II and IV 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. "Variable Annuities: What You Should Know," Page 10. What Are the Distribution Options for an Inherited Annuity? The separate account is used for both variable life insurance and variable annuity investments. You can learn more about the standards we follow in producing accurate, unbiased content in our. Every annuity has some characteristics in common. III. Of the total payroll for the last week of the year, $30,000\$30,000$30,000 is subject to unemployment compensation taxes. covers more than one person. Job Classification: Corporate - Legal and Compliance. must be filed with FINRA. B) with guaranteed minimum withdrawal benefits (GMWBs) the periodic payments can be monthly, quarterly or annually Reference: 12.2.1 in the License Exam. We also reference original research from other reputable publishers where appropriate. *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. The holder of a variable annuity receives the largest monthly payments under which of the following payout options? 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 passion for serving customers and a personal commitment to following through in a dynamic, fast-paced environment. Question #16 of 48Question ID: 606807 *Mortality risk- If an annuitant lives longer than expected, the insurance company will have to continue payments longer than expected. D) Life annuity with 10-year period certain. All of the following are characteristics of Variable Annuity contracts EXCEPT The possibility of higher returns and greater income than fixed annuities, but there's also a risk that the account will fall in value A There are no surrender fees B Guaranteed death benefit C Tax deferred growth D Training Explanations B)a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero Fixed Annuity: A fixed annuity is a type of annuity contract that allows for the accumulation of capital on a tax-deferred basis. A guaranteed death benefit guarantees that the beneficiary will receive a death benefit if the annuitant dies before the annuity begins paying benefits. a. \hspace{10pt} \text{Warehouse salaries} & 110,000 & \hspace{10pt} \text{Social security tax withheld} & 51,714\\ They are also not considered suitable for anyone who anticipates needing a lump sum within a short time frame to fund other endeavors. B) suitable if she has enough equity in the home to fund the variable annuity without cashing out the other VA contract *Accumulation units represent units of ownership in a life insurance company's separate account when the contract is in the accumulation stage. As part of the registration requirements, a prospectus must be filed and distributed to prospective investors. B) II and III In March, the actual net return to the separate account was 8%. Full-Time. d) What is the probability that a user is from the United States, given that he or she logs on every day? The investor has already paid tax on the contributions but the earnings have grown tax-deferred. When the first party dies, the annuity payment is made to the survivor. But again, the need to designate beneficiaries is not an issue for this annuitant. D) the payout plans provide the client income for life. IBM is a global brand and has its presence in 170 countries and operates . This recommendation is: D) unsuitable because her situation exposes her to surrender charges and early withdrawal penalties in exchange for insufficient benefits. Based on the clients profile which of the following would be the best recommendation? A) number of annuity units. A) periodic payment immediate annuity. 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: 12.2.1 in the License Exam. The nature of the securities invested in-bonds and growth stocks-makes it necessary that sales representatives and their principals be licensed in securities as well as insurance. C)I and IV. Therefore only a fixed annuity could be considered as suitable. A)variable annuities may only be sold by registered representatives. Question #24 of 48Question ID: 606806 The remainder of the premium is invested in the separate account. do not have a separate account A trend makes considerable influence or impact. What type of annuity has a cash value that is based upon the performance of it's underlying investment funds? How to Navigate Market Volatility While Saving for Retirement, Variable Annuity: Definition and How It Works, Vs. A) be paid to a designated beneficiary. The earnings on dollars invested into a variable annuity accumulate tax deferred, which is why variable annuities are popular products for retirement accumulation. D) I and IV D)money market funds. Investopedia does not include all offers available in the marketplace. Which 2 of the 4 client profiles would a VA be LEAST suitable for? "Variable Annuities: What You Should Know," Page 6. B) II and IV. Spartan Technology Services and Solutions Private Limited is a subsidiary of IBM (International Business Machines) Corporation. Fixed Annuity, Retirement Annuities: Know the Pros and Cons. *Fixed income instruments, like bonds and fixed annuities, are subject to purchasing power risk. 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. Which of the following is NOT an accurate statement concerning a variable life insurance contract? Her intent was to use the funds for the down payment on a house after graduation. 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. C)the SEC. The funds in an annuity are off-limits to creditors and other debt collectors. For a retired person, which of the following investments would provide the greatest protection against inflation? Do homework Doing homework can help you learn and understand the material covered in class. B)It will be lower. C) suggest to the client that perhaps a loan or refinancing his vacation home might be a better way to fund the contract purchase. For a nonqualified variable annuity, cost basis for the annuitant would use the after-tax dollars contributed. D) None, because it is the proceeds from a life insurance company. A)IPO. approve changes in the plan portfolio. That can adversely affect your returns over the long term, compared with other types of investments. C)Money market fund. D) a minimum of 10 years of variable payments, followed by additional variable payments for life B)FINRA. B)I and III. There are two interest rates under fixed annuities. Round to the nearest hundredth of a percentile. D) Variable annuity. With variable annuities policyholders can choose from a number of investment opportunities. How Good of a Deal Is an Indexed Annuity? A 45-year-old investor takes a lump-sum distribution from a nonqualified variable annuity. Variable annuities are designed to combat inflation risk. And, unlike a fixed annuity, variable annuities do not provide any guarantee that you will earn a return on your investment. A)II and IV. C)with guaranteed minimum withdrawal benefits (GMWBs) the periodic payments can be monthly, quarterly or annually These contracts come with high surrender charges. D)accumulation units. The number of annuity units rises once annuitization begins. An annuity is an agreement for one person or organization to pay another a series of payments. *Under the mortality guarantee, the insurance company assumes mortality risk by guaranteeing payments for life, though the amount of each payment is not guaranteed. D) the payout plans provide the client income for life. A)variable annuities will protect an investor against capital loss. B) II and III The following are the characteristics or the hierarchy of a trend except A. Gigatrends C. Megatrends B. Macrotrends D. Nanotrends _____11. D)partially a tax-free return of capital and partially taxable. A) II and III. The value of the annuity units varies. These include white papers, government data, original reporting, and interviews with industry experts. One of the following would achieve that objective but a suitability discussion regarding it's risk should also occur. B) contact the issuer of the clients existing VA contract to facilitate the clients surrender of the contract. This customer has no spouse or dependents, which negates the value of the death benefit. A variable annuity's separate account is: B) The policyowner. Periodic payment deferred annuity. A client has purchased a nonqualified variable annuity from a commercial insurance company. An accumulation unit in a variable annuity contract is: A life with period certain contract guarantees payments for a specified number of years to a named beneficiary if the annuitant dies during that time. A) It will be higher. B)variable annuities are classified as insurance products. C)Variable annuity contract with a discussion regarding interest rate risk B) I and II. Sub accounts and mutual funds are conceptually. All of the following statements regarding variable annuities are true EXCEPT: A) variable annuities offer the investor protection against capital loss. The paper publication will not be rereleased. The number of accumulation units can rise during the accumulation period. With a fixed annuity, by contrast, the insurance company assumes the risk of delivering whatever return it has promised. D)variable annuities. A rider or statement of condition that allows a variable life insured to maintain policy coverage after becoming disabled is a benefit known as The value of the customer's account is converted into annuity units if and when the customer decides to annuitize the contract. This compensation may impact how and where listings appear. B) II and IV. B) The policyowner. All of the following investment strategies offer either fully or partially tax-deductible contributions to individuals who meet eligibility requirements EXCEPT: Reference: 12.3.3 in the License Exam. Many variable annuities invest the separate account in mutual funds. C) 3800. D) I and II. B)a majority vote from the shareholders is required to change the investment objectives. All of the following are true about annuities EXCEPT: they have all the same characteristics as life insurance. Inflation-hedging, using both tax deferral combined with market growth potential, is made possible by variable annuities #. A variable annuity is both an insurance and a securities product. Ideally they should be funded with readily available cash rather than using funds liquidated from existing investments. How does an indexed annuity differ from a fixed annuity? She will receive the annuity's entire value in a lump-sum payment. Changes in payments on a variable annuity correspond most closely to fluctuations in the: *Only variable annuities have payout plans that provide the client income for life. A prospectus for a variable annuity contract: b. B) the number of annuity units is fixed, and their value remains fixed. Question #19 of 48Question ID: 606826 Securely download your document with other editable templates, any time, with PDFfiller. D)Joint and last survivor annuity. The accumulation unit's value is used to calculate the total value of the 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 C) During the annuity period. A customer has a nonqualified variable annuity. B) accumulation units. 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. C) insurance guarantee. A) waiver of premium When the first party dies, the annuity payment is made to the survivor. A)Fixed annuity contract with a discussion regarding purchasing power risk The growth portion is subject to a 10% penalty. 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. B) variable annuities. A single lump-sum investment is made, and payments begin immediately, since the investor has purchased annuity units. Distributed along a dermatome. B) the rate of return is determined by the underlying portfolio's value. Once a customer annuitizes a variable annuity, which of the following statements are TRUE? C) each annuity unit's value and the number of annuity units vary with time. D) II and IV. Determine whether the following events are independent or dependent. Annuity units are units of ownership when the contract is in the payout stage. Distribution can take place before or during any solicitation for sale. Suppose that 20%20 \%20% of their users are United States users who log on daily. D) II and III. 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 the customer takes a withdrawal of $10,000, what are the tax consequences? 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: Reference: 12.3.2.4 in the License Exam. *Once a variable annuity is annuitized, the accumulation units are converted into a fixed number of annuity units. B) The entire $10,000 is taxable as ordinary income. D) Variable annuities. a variable annuity guarantees an earnings rate of return. D) I and II. As of March 03, 2023, had a relative dividend yield of % compared to the industry median of %. *The accumulation period of a variable annuity may continue for many years. For example, if the income is monthly, the first payment comes one month after the immediate annuity is bought. A the safety of the principal invested B the yield is always higher than bond yields. A) I and II. *A variable annuity may only be surrendered during the accumulation period. Lifetime vs. fixed period annuities B)Life annuity with period certain. A)accumulation shares. 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? Future annuity payments will vary according to the separate account's performance. Question #27 of 48Question ID: 606818 Sample problems from Chapter 9. . D) Keogh plans. A) be paid to a designated beneficiary. A) Ordinary income tax on earnings exceeding basis. In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. 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? If this client is in the payout phase, how would his April payment compare to his March payment? A) Fixed Annuity An individual who purchases a Life annuity is given protection against: the risk of living longer than expected The type of annuity that can be purchased with one monetary deposit is called a (n) Immediate annuity N purchases an annuity by making payments in an amount no less than $100 quarterly. A trend is formed from non-repetitive actions of people. Of the answer choices given the best would be to reevaluate the recommendation based on the new information tendered by the client. Reference: 12.3.1 in the License Exam, Question #30 of 48Question ID: 606833 It may be used by nongovernmental . A) periodic payment immediate annuity. *Annuity death benefits are generally paid in a lump sum. An accumulation unit in a variable annuity contract is: D) tax free. Salaries:SalessalariesWarehousesalariesOfficesalaries$670,000110,000234,000$1,014,000Deductions:IncometaxwithheldSocialsecuritytaxwithheldMedicaretaxwithheldU.S. C)Life annuity. B)fixed in value until the holder retires. MetLife offers a comprehensive benefits program, including healthcare benefits, life insurance, retirement benefits, parental leave, legal plan services and paid time off. Usually the term "annuity" relates to a contract between an individual and a life insurance company. Question #42 of 48Question ID: 606830 D) the yield is always higher than mortgage yields. A) 2800. Designed to protect against inflation. A) two people are covered and payments continue until the second death. Generally, a life-only contract pays the most per month because payments cease at the annuitant's death. If the contract holder dies before the period expires, the remaining payments are made to the beneficiary. A) partially a tax-free return of capital and partially taxable. *The return on a variable annuity is not guaranteed; it is determined by the underlying portfolio's value. The investor purchased accumulation units. C) such an annuity is designed to combat inflation risk. B) The investor's marital status. When a variable annuity contract is annuitized, the number of annuity units is fixed. 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. For this potential advantage, the investor, rather than the insurance company, assumes the investment risk. *BEST Suited for VA-Age 56, available cash to invest, maxes out IRA and 401(k) plan VA will be supplemental income, would not be suitable for cust. are purchased primarily for their insurance features Instructions\textsf{\textcolor{#4257b2}{Instructions}}Instructions At the end of the year your account has a value of 10750. The customer, in the accumulation stage of the annuity, is holding accumulation units. have investment risk that is assumed by the investor D) expense guarantee. Practice all cards. 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. The earnings are taxable but the cost basis is returned tax free. Immediate life annuity. A) I and IV. B)Fixed annuity contract with a discussion regarding timing risk Variable annuities were introduced in the 1950s as an alternative to fixed annuities, which offer a guaranteedbut often lowpayout during the annuitization phase. D)II and IV. B)I and II A)defined contribution plans. The original investment has grown to a value of $60,000. 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. C)II and III. Variable annuity Which of the following is characteristic of fixed annuities? Anthony Battle is a CERTIFIED FINANCIAL PLANNER professional. A) two people are covered and payments continue until the second death. B) fixed in value until the holder retires. Home; About. The annuity unit's value represents a guaranteed return. who needs access to the sum invested at later time. B)value of annuity units. A) each annuity unit's value is fixed, but the number of annuity units varies with time. Question #22 of 48Question ID: 606803 The amount of the purchase payments that go into the account may be less than you paid because fees were taken out of the purchase payments. FINRA. A) changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. They can be classified by: Nature of the underlying investment - fixed or variable The downside was that the buyer was exposed to market risk, which could result in losses. The time period depends on how often the income is to be paid. B)II and III. C) the client assumes the investment risk. On any device & OS. B)fixed in value until the holder retires. D) an accounting measure used to determine the contract owner's interest in the separate account. B) 10% penalty plus payment of ordinary income tax on all funds withdrawn. U.S. Securities and Exchange Commission. This describes which of the following annuities? The growth portion is taxed as a capital gain. A) not suitable However, it does guarantee payments for life (mortality). Question #38 of 48Question ID: 606798 Because the client is older than age 59-, he does not pay 10% premature distribution penalty tax. A)100% tax free. Reasonable accommodations may be made to enable individuals with disabilities to perform the essential functions. 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. the SEC. Because this is not guaranteed, the policyowner bears the investment risk. The value of the separate account is now $30,000. For an insurance company, mortality risk turns out unfavorably if: An 18-year-old, unmarried high school student sought a safe investment for a $30,000 bequest until after she graduated from college. B) Municipal bonds. *The number of variable annuity accumulation units can rise during the accumulation period when additional units are being purchased. Reference: 12.3.3 in the License Exam, Question #34 of 48Question ID: 606834 Licensed to sell Variable Annuities in the following state(s): FL, TX . Over the past five years, 's dividend yield has averaged % per year. U.S. Securities and Exchange Commission. They are also riddled with fees, which can cut into profits. The amount taxed is the amount of the lump-sum payment minus the deceased's cost basis in the investment. Reference: 12.1.2 in the License Exam. What Are the Biggest Disadvantages of Annuities? A prospectus for a variable annuity contract: IV. The $30,000 contract value represents $10,000 of contributions and $20,000 of earnings. Reference: 12.3.1 in the License Exam. Once the cost basis is reached, any further withdrawals are a nontaxable return of principal. Reference: 12.1.4.1 in the License Exam. *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. 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. A) variable annuities offer the investor protection against capital loss. A variable annuity is a type of annuity contract the value of which can vary based on the performance of an underlying portfolio of sub accounts. 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. national origin, genetics, disability, age, veteran status, or any other characteristic protected by law. II. Assuming that the payroll for the last week of the year is to be paid on December 313131, journalize the following entries: 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. B)each annuity unit's value varies with time, but the number of annuity units is fixed. B)4200. C) a variable annuity contract does not guarantee any type of return
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