a variable annuity has which of the following characteristics

Expert Answer. Home; About. CDs insured by the FDIC. Insurance companies introduced the variable annuity as an opportunity to keep pace with inflation. IBM Noida, Uttar Pradesh, India4 weeks agoBe among the first 25 applicantsSee who IBM has hired for this roleNo longer accepting applications. As of March 03, 2023, had a relative dividend yield of % compared to the industry median of %. U.S. Securities and Exchange Commission. C)III and IV. The holder of a variable annuity receives the largest monthly payments under which of the following payout options? What Are the Risks of Annuities in a Recession? B) I and III. C)II and IV. B)Two-thirds of the withdrawal is taxable as ordinary income. This recommendation is: Deal with mathematic Math is all about solving equations and finding the right answer. *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. Reference: 12.1.1 in the License Exam. Variable annuities gave buyers a chance to benefit from rising markets by investing in a menu of mutual funds offered by the insurer. The downside was that the buyer was exposed to market risk, which could result in losses. b. 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. C)complete all paper work to purchase the annuity contract and obtain the clients signature immediately. D)the rate of return is determined by the underlying portfolio's value. B)each annuity unit's value varies with time, but the number of annuity units is fixed. A) a minimum rate of return is guaranteed. Reference: 12.3.3 in the License Exam. The correct answer was: partially a tax-free return of capital and partially taxable. C) value of underlying securities held in the separate account. Reference: 12.1.4.2 in the License Exam. Investopedia does not include all offers available in the marketplace. Chapter 6-Classification Annuities Flashcards | Quizlet A) A variable annuity Before buying a variable annuity, investors should carefully read the prospectus to try to understand the expenses, risks, and formulas for calculating investment gains or losses. Is F&G Annuities & Life Inc (FG) a Good Dividend Stock? | AAII That can adversely affect your returns over the long term, compared with other types of investments. I. In deciding whether to put money into a variable annuity versus some other type of investment, its worth weighing these pros and cons. Question #45 of 48Question ID: 606795 B)II and III. Reasonable accommodations may be made to enable individuals with disabilities to perform the essential functions. Distributions to the annuitant will fluctuate during the payout period. C)A 10% penalty plus the payment of ordinary income tax on all of the funds withdrawn. *Payments from a variable annuity depend on the securities' value in the separate account's underlying investment portfolio. Reference: 12.3.3 in the License Exam. A) mutual fund units. B) The investor's marital status. 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. 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. Salaries:SalessalariesWarehousesalariesOfficesalaries$670,000110,000234,000$1,014,000Deductions:IncometaxwithheldSocialsecuritytaxwithheldMedicaretaxwithheldU.S. The annuity unit's value represents a guaranteed return. have investment risk that is assumed by the investor This recommendation is: D) unsuitable because her situation exposes her to surrender charges and early withdrawal penalties in exchange for insufficient benefits. Shortening the Securities Transaction Settlement Cycle D) The fact that periodic payments into the contract may increase or decrease. C) II and IV C)Growth mutual funds Therefore, variable annuities must be registered with the state insurance commission and the Securities and Exchange Commission. D)0. A)II and III View full document. The fixed payment that the annuitant receives loses purchasing power over time as a result of inflation. B) the client may vote for the board of directors or board of managers. *When a variable contract is annuitized (distributed in regular payments, not as a lump sum), the number of accumulation units is multiplied by the unit value to arrive at the account's current value. Before the contract is annuitized, your client, currently age 60, withdraws some funds for personal purposes. 10.1 This chapter addresses a number of ABS statistics relating to the economically active population which were not discussed elsewhere. Financial Sales Professional Job in Fort Worth, TX at New York Life This would not align with the couple's criteria for coverage as long as they both live. A)Fixed annuity contract with a discussion regarding purchasing power risk can be sold by someone with only an insurance license D) I and III. However, because the client is not yet age 59- when making the withdrawal, he also pays a 10% penalty, or $1,000. D)variable annuities. The accumulation unit's value is used to calculate the total value of the account. The number of annuity units rises once annuitization begins. Distributions from such an annuity are computed on a LIFO basis with the income taxed first. However, it does guarantee payments for life (mortality). The value of accumulation and annuity units varies with the investment performance of the separate account. Full-Time. D) I and IV. \hspace{10pt} \text{Warehouse salaries} & 110,000 & \hspace{10pt} \text{Social security tax withheld} & 51,714\\ C)the invested money will be professionally managed according to the issuers' investment objectives. When the annuitization option is selected, each payment represents both capital and earnings. 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. A) a minimum rate of return is guaranteed. What is the taxable consequence of this withdrawal to your client? B) allow customers to opt out of sharing of financial information with certain nonaffiliated firms. B)Capital gains taxation on the earnings withdrawn in excess of the owner's basis. Reference: 12.3.2.4 in the License Exam. When money is deposited into the annuity, it is purchasing accumulation units. B) II and III. Once the contract is annuitized, monthly payments to the customer are: Variable annuities operate in similar ways to . A security is any investment for profit with management performed by a third party. D) II and III. C) I and IV. D) 4500. Science Health Science Nursing. A 45-year-old employed individual with no other retirement accounts in place A) periodic payment immediate annuity. B)I and II A)contact the issuer of the clients existing VA contract to facilitate the clients surrender of the contract. Therefore, ordinary income taxes will apply to the entire $10,000. The money paid in will be returned tax free, but the earnings portion will be taxed as ordinary income. Variable annuity Which of the following is characteristic of fixed annuities? *Mortality risk- If an annuitant lives longer than expected, the insurance company will have to continue payments longer than expected. The accumulation period of a variable annuity may continue for many years. A variable annuity's separate account is: A customer has an investment objective of keeping pace with inflation while assuming moderate risk. Your customer in his early 30s has received a modest inheritance from a relative. 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. As part of the registration requirements, a prospectus must be filed and distributed to prospective investors. Withdrawals from a nonqualified variable annuity are made on a LIFO basis, so the taxable earnings are considered taken out before principal. Reference: 12.2.1 in the License Exam. A) complete all paper work to purchase the annuity contract and obtain the clients signature immediately. A customer has contributed $1,000 a year for 10 years to his tax-deferred nonqualified variable annuity. B)Variable annuities. required to be located off of the company's premises. Based only on these facts, the variable annuity recommendation is Reference: 12.3.4 in the License Exam. B) 10% penalty plus payment of ordinary income tax on all funds withdrawn. 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. Question #16 of 48Question ID: 606807 Determine the revenue equation given the profit and expense equations. D) Variable annuities. Which of the following statements regarding variable annuities are TRUE? The annuitized payments are viewed for tax purposes as The value of the customer's account is converted into annuity units if and when the customer decides to annuitize the contract. A)equity funds. A client has purchased a nonqualified variable annuity from a commercial insurance company. GuranteedExamLife Flashcards by Gabriel Martinez | Brainscape The growth portion is subject to a 10% penalty. All of the following are characteristics of a variable annuity, except: a. C)municipal bonds. 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. What are the different types of annuities? | III III. When the first party dies, the annuity payment is made to the survivor. A registered representative recommends a variable annuity with an income rider to a client. D) an accounting measure used to determine the contract owner's interest in the separate account. 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. Variable annuity salespeople must register with all of the following EXCEPT: Which of the following are defined as securities? When a variable annuity contract is annuitized, the number of annuity units is fixed. Fixed annuities pay a fixed monthly benefit which loses purchasing power if there is inflation. 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? national origin, genetics, disability, age, veteran status, or any other characteristic protected by law. B) The proceeds minus John's cost basis taxed as ordinary income at Sue's tax rate. Who assumes the investment risk in a variable annuity contract? A) a variable annuity contract will provide a fluctuating monthly check upon the annuitization of the contract Reference: 12.1.2.1.1. in the License Exam. C) IRAs. His objective is monthly income that he can receive after he retires to supplement his small pension and social security benefits. externalities. In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. If your customer invests in a variable annuity and chooses to annuitize at age 65, which of the following statements are TRUE? The AG49-A Revisions Spartan Technology Services and Solutions Private Limited is a subsidiary of IBM (International Business Machines) Corporation. Reference: 12.2.1 in the License Exam. 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. D) each annuity unit's value varies with time, but 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. 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. D)I and IV, Universal variable life policies are insurance company products that should be purchased primarily for the insurance features they offer rather than as an investment. guarantees payments for a certain period of time. A) I and II B) variable annuities are classified as insurance products. The payout compared to last month's payout. B)a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero Classifying annuities There are many categories of annuities. A trend is formed from non-repetitive actions of people. A) periodic payment immediate annuity. An investor owning which of the following variable annuity contracts would hold accumulation units? A)Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. *VAs are less suitable for individuals who have not yet made maximum contributions to other retirement accounts such as IRAs and 401ks. U.S. Securities and Exchange Commission. During the accumulation phase, you make purchase payments. A) Only during the payout period. LESSON 7: ANNUITIES - FIXED AND VARIABLE - course.uceusa.com Annuity units are units of ownership when the contract is in the payout stage. An immediate annuity is designed to pay an income one time-period after the immediate annuity is bought. Then find the probability of the event. C) III and IV. She will receive the annuity's entire value in a lump-sum payment. *A periodic payment immediate annuity is a contradiction in terms. A separate account will invest in a number of different securities. The annuity unit's value represents a guaranteed return. D) a minimum of 10 years of variable payments, followed by additional variable payments for life A rider or statement of condition that allows a variable life insured to maintain policy coverage after becoming disabled is a benefit known as D) Capital gains tax on earnings exceeding basis. 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. B) Exchange traded Funds (ETFs) or Exchange traded Notes (ETNs) A client has purchased a nonqualified variable annuity from a commercial insurance company. Policyholders . Question #42 of 48Question ID: 606830 B) II and III B) the number of annuity units is fixed, and their value remains fixed. Reference: 12.2.1 in the License Exam. This guideline has been prepared for use by Federal agencies. A)the yield is always higher than mortgage yields. B) II and IV. The value of the annuity units varies. 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 continues payments only as long as all annuitants are still alive. The number of annuity units rises once annuitization begins. What Are the Biggest Disadvantages of Annuities? Since the client is older than 59 at the time of distribution, the additional 10% penalty tax is not incurred. None of the other investments listed here offer tax-deferred growth. Inflation-hedging, using both tax deferral combined with market growth potential, is made possible by variable annuities #. *A variable annuity does not guarantee an earnings rate because earnings will depend on the performance of the separate account. D) I and III. B) II and III. In the case of deferred annuities, this is often referred to as the accumulation phase. *Variable annuity contracts were devised to help investors keep pace with inflation. When the annuitization option is selected, each payment represents both capital and earnings. D) tax free. You can tailor the income stream to suit your needs. Periodic payments are not a consideration because normally the payments into an annuity are level or in a lump sum. savingsbonds30,420Groupinsurance45,630$341,718\begin{array}{lrlr} Question #19 of 48Question ID: 606826 \hspace{7pt} b. January 444, to record the employers payroll taxes on the payroll to be paid on January 444. B)reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. Before the contract is annuitized, your client, currently age 60, withdraws some funds for personal purposes. D) an accounting measure used to determine the contract owner's interest in the separate account. D)all return of cost basis and nontaxable, Annuitized payments from a variable annuity are viewed for tax purposes as part earnings and part cost basis. C) single payment immediate annuity. D) I and III. When the second party dies, all payments cease. For a retired person, which of the following investments would provide the greatest protection against inflation? C) III and IV She may choose to receive monthly payments for the rest of her life. He wants to ensure that the client, in addition to meeting suitability requirements, is aware of certain variable annuity contract characteristics. Annual depreciation on the machine is$12,000, and the tax rate of the company is 25%. \hspace{10pt} \text{Sales salaries} & \$\hspace{5pt} 670,000 & \hspace{10pt} \text{Income tax withheld} & \$198,744\\ 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. "Variable Annuities: What You Should Know," Page 10. *An immediate annuity has no accumulation period. Get the free Learn About Annuities and Their Myths - F&G If the owner of a variable annuity dies during the accumulation period, any death benefit will: can be sold by someone with only an insurance license The entire amount is taxed as ordinary income. The annuitant may not contribute and withdraw simultaneously. A) Fixed Annuity B)suitable regardless of funding sources who needs access to the sum invested at later time. B)changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. A) Capital gains taxation on the earnings withdrawn in excess of the owner's basis. This describes which of the following annuities? Trends Networks and Critical Thinking Module 2 "Variable Annuities: What You Should Know," Page 3. Contributions to an IRA may be tax deductible, depending on the individual's earnings and participation in a company-sponsored qualified retirement plan. A variable annuity is just a tax-deferred annuity in which you get to choose how the value of the annuity is invested. D) Age 27, saving for first home. *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. C)II and IV. An important basic characteristic of common stocks that makes them a suitable type of investment for the separate account of variable annuities is: A) taxed at a reduced rate. When the contract is annuitized, the annuitant is credited with a fixed number of annuity units. A) I and II When may a variable annuity account be surrendered? What Are the Distribution Options for an Inherited Annuity? Question #35 of 48Question ID: 606810 And, unlike a fixed annuity, variable annuities do not provide any guarantee that you will earn a return on your investment. B)Tax-free municipal bonds A variable annuity is a contract between you and an insurance company, under which the insurer agrees to make periodic pay- ments to you, beginning either immediately or at some future date. Reference: 12.3.2.1 in the License Exam. 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. 111. D)partially a tax-free return of capital and partially taxable. D) cost of living. Many variable annuities invest the separate account in mutual funds. B) Life annuity. Payments from a variable annuity depend on the securities' value in the separate account's underlying investment portfolio. In a variable annuity contract, the provision that guarantees the annuitant payments for life is called the: MetLife, Inc. Senior Customer Care Advocate Annuities ($22 per hour C)Money market fund. All of the following investment strategies offer either fully or partially tax-deductible contributions to individuals who meet eligibility requirements EXCEPT: B)FINRA. Based on this information the RR should: Question #12 of 48Question ID: 606814 The payout compared to the initial payout upon annuitization. D)A variable annuity, Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. Question #36 of 48Question ID: 606805 B) life income 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. With variable annuities policyholders can choose from a number of investment opportunities. This factor is used to establish the dollar amount of the first annuity payment. A customer is receiving annuitized payments from a variable annuity. D) Variable annuity. Annuities due are a type of annuity where payments are made at the beginning of each payment period. The tax on this is $2,800 ($10,000 x 28%). The number of annuity units is fixed at the time of annuitization. A 3 D) reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. Variable annuities provide protection from inflation because their monthly income can increase depending on the separate account's performance. C) Universal variable life policy. C)number of accumulation units. Spartan Technology Services and Solutions Private Limited is a subsidiary of IBM (International Business Machines) Corporation. The fees on variable annuities can be quite hefty. An investor who purchases a fixed annuity contract assumes purchasing-power risk. Over the following year, the stock fund has a 10% return, and the bond fund has a 5% return. For example, if the income is monthly, the first payment comes one month after the immediate annuity is bought. If in the following year, the S&P 500 declined by 5%, the annuities value would remain at $107,000 because gains are locked in each year. D) accumulation shares. 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: The growth portion is taxed as ordinary income. Fixed annuities typically earn at a lower, stable rate. D) I and IV. D)Investment risk. Based on the clients profile which of the following would be the best recommendation? The funds are not liquid due to the surrender fees, and there is also a 10% penalty on withdrawals before age 59-. When the annuitization option is selected, each payment represents both capital and earnings. Which of the following statements is not true about the characteristics of a trend? Fixed Annuity: A fixed annuity is a type of annuity contract that allows for the accumulation of capital on a tax-deferred basis. An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are Get Started. II) It has an internal capital market wherein each division competes for funds. DR:BASSANT ADEL 9 QUIZ CH 6 Choose the correct answer: 1-Insurance policy benefits are classified on an insurance company's balance sheet as A. liabilities, because the insurance company may have to pay out the benefits B. assets, because policy benefits are valuable to the company C. liabilities, because customers may fall behind on their premium payments D. assets, because policy benefits . All of the following statements regarding variable annuities are true EXCEPT: A) variable annuities offer the investor protection against capital loss. Reference: 12.1.4.1 in the License Exam. 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 However, at the end of the period certain the payments to the named beneficiary (the spouse) will stop. C) a variable annuity contract does not guarantee any type of return D) each annuity unit's value varies with time, but the number of annuity units is fixed. There is no clear answer to this. A)I and IV. B)I and IV. B)corporate stock. B)II and III. C) such an annuity is designed to combat inflation risk. PDF The NIST definition of cloud computing C) II and III. Variable annuity salespeople must register with all of the following EXCEPT: A) FINRA. C) There is no tax as the withdrawal is considered return of capital. How to Navigate Market Volatility While Saving for Retirement, Variable Annuity: Definition and How It Works, Vs. A) be paid to a designated beneficiary. *Under the mortality guarantee, the insurance company assumes mortality risk by guaranteeing payments for life, though the amount of each payment is not guaranteed. A) 4000. Future annuity payments will vary according to the separate account's performance. Future annuity payments will vary according to the separate account's performance. Herpes Zoster has all of the following characteristics except: C) suitable regardless of funding sources We also reference original research from other reputable publishers where appropriate.

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