Variable annuities provide protection from inflation because their monthly income can increase depending on the separate account's performance. A) The policy provides a minimum guaranteed death benefit. This chapter was updated on 15 December, 2005. C) insurance companies keep variable annuity funds in separate accounts from other insurance products. && \hspace{10pt}\text{Group insurance} & \underline{45,630}\\ However, they are protected by state guaranty associations in the event that the insurance company providing the product goes out of business. A 45-year-old investor takes a lump-sum distribution from a nonqualified variable annuity. B) payments continue until the death of the primary owner. Annuities: How to Find the Right One for You, How a Fixed Annuity Works After Retirement, Pros and Cons of Indexed Universal Life Insurance. A 32-year-old with a company-sponsored 401k plan who will need a lump sum soon to finance graduate school tuition 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. The following are the characteristics or the hierarchy of a trend except A. Gigatrends C. Megatrends B. Macrotrends D. Nanotrends _____11. 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. C)Life annuity. A 58-year-old individual near retirement who is in good health and anticipates a lengthy retirement are purchased primarily for their insurance features D) each annuity unit's value varies with time, but the number of annuity units is fixed. "Variable Annuities: What You Should Know," Page 10. A)II and IV. C) none of these. A)each annuity unit's value and the number of annuity units vary with time. A 10% penalty applies only if distributions begin before age 59-. B) I and IV. Skylar Clarine is a fact-checker and expert in personal finance with a range of experience including veterinary technology and film studies. *Universal variable life policies are insurance company products that should be purchased primarily for the insurance features they offer rather than as an investment. b) What probability is the 20%20 \%20% mentioned above? A) I and III. I. \hspace{7pt} a. December 303030, to record the payroll. The number of accumulation units can rise during the accumulation period. A) Fixed Annuity \text{Salaries:} && \text{Deductions:}\\ This customer has no spouse or dependents, which negates the value of the death benefit. B) The entire $10,000 is taxable as ordinary income. Science Health Science Nursing. Your client has a large sum of money to invest from the proceeds of the sale of his home. Question #28 of 48Question ID: 606821 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. B) the client may vote for the board of directors or board of managers. *During the accumulation phase, the number of accumulation units will increase as additional money is invested. Do homework Doing homework can help you learn and understand the material covered in class. Question #35 of 48Question ID: 606810 the state insurance commission. B)mutual fund units. Variable annuities are riskier than fixed annuities because the underlying investments may lose value. Life income riders are best suited for those who anticipate a lengthy retirement and are generally not yet retired when making the VA purchase. Once annuitized, the number of annuity units does not vary. Generally, a life-only contract pays the most per month because payments cease at the annuitant's death. C) II and III. There is a guaranteed minimum interest rate, normally amounting to between 1 and 3 percent. Table1. Question #27 of 48Question ID: 606818 A customer has contributed $1,000 a year for 10 years to his tax-deferred nonqualified variable annuity. B) variable annuities. is required by the Securities Act of 1933. Reference: 12.1.2.1.2 in the License Exam. Final answer. Assuming that the payroll for the last week of the year is to be paid on January 444 of the following fiscal year, journalize the following entries: Inflation-hedging, using both tax deferral combined with market growth potential, is made possible by variable annuities #. B) II and III Clusters of vesicles in various stages. Question #42 of 48Question ID: 606830 C) A 10% penalty plus the payment of ordinary income tax on all of the funds withdrawn. B)a minimum rate of return is guaranteed. Question #36 of 48Question ID: 606805 Though there is no beneficiary designation during the annuitization, this is not an issue for this annuitant. Fixed annuities. Reference: 12.3.1 in the License Exam, Question #30 of 48Question ID: 606833 Reference: 12.3.2.4 in the License Exam. 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? What Are Ordinary Annuities, and How Do They Work (With Example)? They offer broad diversification in the securities market and potential growth, all while using the power of tax deferral. Each of the remaining statements are true. D) payments continue until age 70-. Reference: 12.3.3 in the License Exam. 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. *Once a variable annuity is annuitized, the accumulation units are converted into a fixed number of annuity units. C) A 25year old public school teacher who would like to save enough for the purchase of her first home within the next 3 to 5 years. Home; About. All of the following investment strategies offer either fully or partially tax-deductible contributions to individuals who meet eligibility requirements EXCEPT: Your client owns a variable annuity contract with an AIR of 4%. "Variable Annuities: What You Should Know," Pages 67. Complete a blank sample electronically to save yourself time and money. Fixed interest rates during the payout period The value of each accumulation unit varies: Daily Variable annuities have Variable interest rates and benefits All of the following statements are true regarding the interest rate guarantees of fixed annuities, EXCEPT: During the accumulation phase, the number of accumulation units will increase as additional money is invested. 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. D)A variable annuity, Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. a. Question #44 of 48Question ID: 606797 *Waiver of premium is a benefit available on qualified life insurance contracts, usually in the form of a rider, which provides for the waiver of premium payments that fall due while the policyholder is totally disabled. His objective is monthly income that he can receive after he retires to supplement his small pension and social security benefits. A) Age 56, available cash to invest, makes the maximum retirement plan contributions to an existing IRA and 401(k) plan The payout compared to the initial payout upon annuitization. Spartan Technology Services and Solutions Private Limited is a subsidiary of IBM (International Business Machines) Corporation. *The customer, in the accumulation stage of the annuity, is holding accumulation units. *A variable annuity is a security and must be registered with the SEC, not FINRA. 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. B) II and IV. must precede every sales presentation. Reference: 12.1.1 in the License Exam. C)A 10% penalty plus the payment of ordinary income tax on all of the funds withdrawn. The annuity unit's value represents a guaranteed return. *Contributions to a nonqualified annuity are made with the owner's after-tax dollars. A customer has contributed $1,000 a year for 10 years to his tax-deferred nonqualified variable annuity. Question #47 of 48Question ID: 606813 D) I and III. B) the number of annuity units is fixed, and their value remains fixed. Assuming that the payroll for the last week of the year is to be paid on December 313131, journalize the following entries: D)It cannot be determined until the April return is calculated. D)I and II. C)III and IV B) variable annuities. **Because common stocks are not fixed dollar investments, they have the opportunity to keep pace with inflation. C) Tax-free municipal bonds Reference: 12.1.4.2 in the License Exam. Question #13 of 48Question ID: 606822 Contributions to a nonqualified variable annuity are not tax deductible. A registered person recommends the purchase of a variable annuity to one of his clients. The investor has already paid tax on the contributions but the earnings have grown tax-deferred. B)Capital gains taxation on the earnings withdrawn in excess of the owner's basis. The value of the annuity units is fixed. During the accumulation phase, you make purchase payments. D) a variable annuity contract is subject to fluctuating values due to market fluctuations of the underlying separate accounts. D) reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. Based on the clients profile which of the following would be the best recommendation? A customer has an investment objective of keeping pace with inflation while assuming moderate risk. For an investor, which of the following is the most important factor in determining the suitability of a variable annuity investment? Usually the term "annuity" relates to a contract between an individual and a life insurance company. Which of the following statements regarding variable annuities are TRUE? Fixed income instruments, like bonds and fixed annuities, are subject to purchasing power risk. B) I and III. D)0. A) waiver of premium This makes a total of $4,000 tax and penalty paid on the random withdrawal. A)Corporate debt securities Listing tax-deferred growth as an objective for retirement income, which of the following investments is most suitable? Ideally they should be funded with readily available cash rather than using funds liquidated from existing investments. Life Insurance vs. Annuity: What's the Difference? C) III and IV. D) II and IV. Most annuities will not allow you to withdraw additional funds from the account once the payout phase has begun. *Annuity death benefits are generally paid in a lump sum. A Variable Annuity has which of the following characteristics? D) II and III. A variable annuity is a combination of 2 products: an insurance contract and a mutual fund. The value of the separate account is now $30,000. However, at the end of the period certain the payments to the named beneficiary (the spouse) will stop. B) contact the issuer of the clients existing VA contract to facilitate the clients surrender of the contract. A)an accounting measure used to determine the contract owner's interest in the separate account. C) III and IV A)There is no tax as the withdrawal is considered return of capital. C)Keogh plans. 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. C) I and IV. \hspace{10pt} \text{Sales salaries} & \$\hspace{5pt} 670,000 & \hspace{10pt} \text{Income tax withheld} & \$198,744\\ If the annuitant dies during the accumulation period, his/her beneficiary will receive the promised annuity payments. D)I and III. A universal variable life policy should be purchased primarily for its insurance features, not its investment features. C) During the annuity period. The customer, in the accumulation stage of the annuity, is holding accumulation units. The return on a variable annuity is not guaranteed; it is determined by the underlying portfolio's value. A) changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. The number of annuity units is fixed. Reference: 12.2.1 in the License Exam. D)partially a tax-free return of capital and partially taxable. Variable annuities offer the possibility of higher returns and greater income than fixed annuities, but theres also a risk that the account will fall in value. If an investor has a fixed-annuity contract with an insurance company, which of the following risks is assumed by the investor? A) I and III. An 18-year-old, unmarried high school student sought a safe investment for a $30,000 bequest until after she graduated from college. *The owner of a life annuity with 10-year period certain will receive payments for life, subject to a minimum of 10 years. B)It will be lower. D) I and IV. A) two people are covered and payments continue until the second death. Variable annuity salespeople must register with all of the following EXCEPT: Which of the following are defined as securities? With regard to a variable annuity, all of the following may vary EXCEPT: C)the invested money will be professionally managed according to the issuers' investment objectives. Both products typically have a wide range of options across equities, bonds and money market instruments. B) the safety of the principal invested. *Under the mortality guarantee, the insurance company assumes mortality risk by guaranteeing payments for life, though the amount of each payment is not guaranteed. The minimum guaranteed death benefit is provided by that portion of the payment invested in the insurance company's general account. A) I and IV. C) II and IV When a partial withdrawal is made from an annuity, the earnings are considered to be taken out first for tax purposes (or LIFO). If the account is annuitized, the investor has chosen a payout option. \hspace{10pt} \text{Office salaries} & \underline{234,000} & \hspace{10pt} \text{Medicare tax withheld} & 15,210\\ C)Growth mutual funds *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. 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. C) such an annuity is designed to combat inflation risk. Variable Annuities. An Immediate Annuity is designed to provide each of the following features, EXCEPT: The creation of an estate. Variable annuity Which of the following is characteristic of fixed annuities? variable An immediate annuity consists of a Single Premium T has an annuity that guarantees an income payment for the rest of his life. A) It will be higher. The value of the annuity units varies. You purchase a variable annuity contract by making either a single purchase payment or a series of purchase payments. They are also not considered suitable for anyone who anticipates needing a lump sum within a short time frame to fund other endeavors. A) Fixed annuities. D) I and III D)value of accumulation units. 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 In deciding whether to put money into a variable annuity versus some other type of investment, its worth weighing these pros and cons. Annuities are complicated products, so that may be easier said than done. 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. In addition, an element of risk must be present. A joint-and-last-survivor annuity is a payout option where: a life insurance holder dies sooner than expected. Insurance companies introduced the variable annuity as an opportunity to keep pace with inflation. D) cost of living. In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. 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)variable annuities may only be sold by registered representatives. D) None, because it is the proceeds from a life insurance company. Guaranteed Lifetime Annuity: How They Work, When They Pay You, This is also generally true of retirement plans. A registered representative explaining variable annuities to a customer would be CORRECT in stating that: Distribution can take place before or during any solicitation for sale. Annuities due are a type of annuity where payments are made at the beginning of each payment period. B)variable annuities are classified as insurance products. *When money is deposited into the annuity, it is purchasing accumulation units. B)Value of each annuity unit each month. The payout compared to last month's payout. Then find the probability of the event. Reference: 12.3.3 in the License Exam. The fees on variable annuities can be quite hefty. D)II and IV. When money is deposited into the annuity, it is purchasing accumulation units. *A periodic payment immediate annuity is a contradiction in terms. The money paid in will be returned tax free, but the earnings portion will be taxed as ordinary income. must provide full and fair disclosure. Life income riders are best suited for those who anticipate a lengthy retirement and are generally not yet retired when making the VA purchase. C)insurance companies keep variable annuity funds in separate accounts from other insurance products. Options. The accumulation unit's value is used to calculate the total value of the account. 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. Who assumes the investment risk in a variable annuity contract? B) Life annuity with period certain \hspace{10pt} Federal unemployment (employer only), 0.8%0.8\%0.8%. On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity). the agent must be licensed in both insurance and securities. If an investor has a fixed-annuity contract with an insurance company, which of the following risks is assumed by the investor? C)the yield is always higher than bond yields. A) II and IV. Practice all cards. A) partially a tax-free return of capital and partially taxable. What percentile is represented by $710? B) the state insurance department.