*Fixed income instruments, like bonds and fixed annuities, are subject to purchasing power risk. When a partial withdrawal is made from an annuity, the earnings are considered to be taken out first for tax purposes (or LIFO). A)the state banking commission. D)the state insurance department. The growth portion is taxed as a capital gain. D) Variable annuities. a. *The customer, in the accumulation stage of the annuity, is holding accumulation units. Once a variable annuity has been annuitized: A) number of annuity units. A)Joint tenants annuity. B. C) A 10% penalty plus the payment of ordinary income tax on all of the funds withdrawn. Reference: 12.3.3 in the License Exam, Question #34 of 48Question ID: 606834 A 10% penalty applies only if distributions begin before age 59-. C) such an annuity is designed to combat inflation risk. B) Life annuity. What is the taxable consequence of this withdrawal to your client? If you need to withdraw money from the account because of a financial emergency, you may face surrender fees. Final answer. The annuitized payments are viewed for tax purposes as B)Two-thirds of the withdrawal is taxable as ordinary income. D) III and IV. *An immediate annuity has no accumulation period. The wage for applicants for this position is $45,979.00 per year. III. The number of annuity units rises once annuitization begins. A 45-year-old employed individual with no other retirement accounts in place D) I and II. Question #37 of 48Question ID: 606817 However, a discussion should occur regarding the risks that are associated with a fixed annuity; purchasing power risk. Herpes Zoster has all of the following characteristics except: *Since this is a nonqualified annuity (with no tax deduction), the client pays taxes only on the growth portion or, in this case, $10,000. A variable annuity is a type of annuity contract in which the value can vary based on the performance of an u . 222. (primary needs). Changes in payments on a variable annuity correspond most closely to fluctuations in the: Round to the nearest hundredth of a percent. A) mortality guarantee. 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)each annuity unit's value is fixed, but the number of annuity units varies with time. D) I and III A) I and II. b) What probability is the 20%20 \%20% mentioned above? Life with period certain will produce a smaller check for life because the insurance company will guarantee payments to a beneficiary for a certain period of time designated in the contract should the annuitant die within that period. He earned the Chartered Financial Consultant designation for advanced financial planning, the Chartered Life Underwriter designation for advanced insurance specialization, the Accredited Financial Counselor for Financial Counseling and both the Retirement Income Certified Professional, and Certified Retirement Counselor designations for advance retirement planning. C) II and IV. You purchase a variable annuity contract by making either a single purchase payment or a series of purchase payments. Your 55-year-old client invested $50,000 four years ago in a nonqualified variable annuity. II. B)II and III. The entire amount is taxed as ordinary income. No Hibernation for Issuers of Index-Linked Variable Annuities and Index Contributions to an IRA may be tax deductible, depending on the individual's earnings and participation in a company-sponsored qualified retirement plan. What will this transaction provide? 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. Which of the following is not characteristic of a fixed annuity? B)value of annuity units. 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. The most popular type of variable annuity is a deferred annuity. The money paid in will be returned tax free, but the earnings portion will be taxed as ordinary income. Chapter 12 - Variable Annuities Flashcards | Chegg.com Her intent was to use the funds for the down payment on a house after graduation. *A variable annuity does not guarantee an earnings rate because earnings will depend on the performance of the separate account. Listing tax-deferred growth as an objective for retirement income, which of the following investments is most suitable? D) each annuity unit's value varies with time, but the number of annuity units is fixed. C) with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed B) The investor's marital status. C)Corporate bonds. 8 annuities provide a guaranteed rate of return, whereas annuities provide conservative to aggressive investments whose rates of return are not guaranteed. IBM is a global brand and has its presence in 170 countries and operates . D) I and IV. D)II and III. D)II and IV. \hspace{7pt} b. January 444, to record the employers payroll taxes on the payroll to be paid on January 444. In March, the actual net return to the separate account was 8%. A) III and IV. D) Growth mutual funds. When the first party dies, the annuity payment is made to the survivor. While variable annuities have greater potential for earnings, since their interest rate rises and falls with their underlying investments, they can lose money. C) early annuity phase-in Variable annuity salespeople must register with all of the following EXCEPT: C) III and IV. 6102..55.001) is being updated on an ongoing basis. The offers that appear in this table are from partnerships from which Investopedia receives compensation. MetLife, Inc. Senior Customer Care Advocate Annuities ($22 per hour 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 a variable annuity has been annuitized: The earnings on dollars invested into a variable annuity accumulate tax deferred, which is why variable annuities are popular products for retirement accumulation. B) with guaranteed minimum withdrawal benefits (GMWBs) the periodic payments can be monthly, quarterly or annually D) I and III. A)There is no tax as the withdrawal is considered return of capital. Suppose that 20%20 \%20% of their users are United States users who log on daily. This recommendation is: D) unsuitable because her situation exposes her to surrender charges and early withdrawal penalties in exchange for insufficient benefits. Reference: 12.2.1 in the License Exam. Registration with FINRA is de facto registration with the SEC; no registration is required by the state banking commission. D)the safety of the principal invested. B) single payment deferred annuity. The value of accumulation and annuity units varies with the investment performance of the separate account. vote for the investment adviser. Options. If the annuitant should die during that time, any death benefit would be paid to a beneficiary designated by the annuitant at the time the annuity was purchased. B) the state insurance department. You can learn more about the standards we follow in producing accurate, unbiased content in our. A variable annuity is a combination of 2 products: an insurance contract and a mutual fund. \hspace{7pt} b. December 303030, to record the employers payroll taxes on the payroll to be paid on December 313131. Her agent recommended she choose a variable annuity as a safe haven for the funds. PDF Variable Annuities: What You Should Know - SEC B)I and III. C)none of these. B)Value of each annuity unit each month. In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. Reference: 12.1.1 in the License Exam. C) Mutual fund portfolio consisting of blue chip stocks C) annuity units. Home; About. This compensation may impact how and where listings appear. The tax on this is $2,800 ($10,000 x 28%). In March, the actual net return to the separate account was 8%. C)number of accumulation units. \hspace{10pt} Medicare, 1.5%1.5\%1.5% What Are Ordinary Annuities, and How Do They Work (With Example)? C)none of these. Periodic payments are not a consideration because normally the payments into an annuity are level or in a lump sum. 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) the number of annuity units becomes fixed when the contract is annuitized. A) I and IV. *A variable annuity may only be surrendered during the accumulation period. D) not suitable because a lifetime income rider is only for someone who is already retired. \end{array} PGIM Fixed Income has over $900 billion in assets under management across a broad array of fixed . An example would be if a life annuity with 10-year period certain contract holder died after 5 years, payments would continue for 5 more years to the beneficiary and then stop. 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: C) payments continue for a pre-determined period of time. D) Two-thirds of the withdrawal is taxable as ordinary income. CDs insured by the FDIC. A) Life-only annuity Each of the remaining statements are true. A)III and IV. B) Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. What is her total tax liability? IBM hiring Practitioner- Policy Admin in Noida, Uttar Pradesh, India B) II and IV. B) I and III. What type of annuity has a cash value that is based upon the performance of it's underlying investment funds? $63,000 b.$51,000 c. $18,000 d.$6,000. The number of annuity units is fixed at the time of annuitization. II. John is the annuitant in a variable plan, and Sue is the beneficiary. Transcribed image text: 6. C)Keogh plans. Nicks Enterprises has purchased a new machine tool that will allow the company to improve the efficiency of its operations. A. A prospectus for a variable annuity contract: C)prime rate. D) periodic payment deferred annuity. Reference: 12.3.4 in the License Exam, Chapter 16: U.S. Government and State Rules a, Chapter 17: Other SEC and SRO Rules and Regul, Chapter 15: Ethics, Recommendations, and Taxa, Chapter 13: Direct Participation Programs, Fundamentals of Financial Management, Concise Edition, Joe B. Hoyle, Thomas F. Schaefer, Timothy S. Doupnik, Carl Warren, James M Reeve, Jonathan E. Duchac. Flashcards - Securities and Tax - FreezingBlue Question #47 of 48Question ID: 606813 A) complete all paper work to purchase the annuity contract and obtain the clients signature immediately. D)I and III. Every annuity has some characteristics in common. must precede every sales presentation. B) I and III. Suggesting that loans or drawing equity from a home to fund VA contracts have also been targeted as abusive sales practices. B) The proceeds minus John's cost basis taxed as ordinary income at Sue's tax rate. 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. B) The death benefit cannot ever be more than the guaranteed benefit. D)an accounting measure used to determine payments to the owner of the variable annuity. Question #18 of 48Question ID: 606827 C) Universal variable life policy. A) The fact that the annuity payment may increase or decrease. Single payment deferred annuity. It was a lump-sum purchase. Since the client is older than 59 at the time of distribution, the additional 10% penalty tax is not incurred. The number of annuity units varies. C) the client assumes the investment risk. The number of variable annuity accumulation units can rise during the accumulation period when additional units are being purchased. Based only on these facts, the variable annuity recommendation is None of the other investments listed here offer tax-deferred growth. A customer has a nonqualified variable annuity. A)unsuitable because the return on something as conservative as a variable annuity tends to be low. D) the yield is always higher than mortgage yields. A) Age 56, available cash to invest, makes the maximum retirement plan contributions to an existing IRA and 401(k) plan Variable annuities are designed to combat inflation risk. Guaranteed Lifetime Annuity: How They Work, When They Pay You, This is also generally true of retirement plans. C)the invested money will be professionally managed according to the issuers' investment objectives. Therefore, variable annuities must be registered with the state insurance commission and the Securities and Exchange Commission. D) I and II. D) each annuity unit's value varies with time, but the number of annuity units is fixed. When may a variable annuity account be surrendered? B)unsuitable because her situation exposes her to surrender charges and early withdrawal penalties in exchange for insufficient benefits. covers more than one person. # 7 Annuities Flashcards | Quizlet \hspace{10pt} State unemployment (employer only), 3.8%3.8\%3.8% D)value of accumulation units. 11.1: Fundamentals of Annuities - Mathematics LibreTexts We also reference original research from other reputable publishers where appropriate. variable annuity without paying tax at the time of the transfer. Your customer in his early 30s has received a modest inheritance from a relative. B) life income A trend makes considerable influence or impact. Of the answer choices given the best would be to reevaluate the recommendation based on the new information tendered by the client. D) an accounting measure used to determine the contract owner's interest in the separate account. A)accumulation shares. The customer, in the accumulation stage of the annuity, is holding accumulation units. 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. Diagnosis is made by punch biopsy. A) Ordinary income tax on earnings exceeding basis. All of the following statements about variable annuities are true EXCEPT: a variable annuity has which of the following characteristics Reference: 12.3.3 in the License Exam. The paper publication will not be rereleased. The growth portion is subject to a 10% penalty. the agent must be licensed in both insurance and securities. Uses in Investing, Pros, and Cons, Indexed Annuity: Definition, How It Works, Yields, and Caps. Indexed annuity owners receive credited interest tied to the fluctuations of the linked index An immediate annuity consists of a single premium An immediate annuity has a single premium. Variable Annuity Features | Annuity Guys D) a variable annuity contract is subject to fluctuating values due to market fluctuations of the underlying separate accounts. e) Are From the United States and Log on every day independently? A) Dow Jones Industrial Average. Question #27 of 48Question ID: 606818 must be filed with FINRA. The value of these units varies with the performance of the separate account. A) Age 56, available cash to invest, makes the maximum retirement plan contributions to an existing IRA and 401(k) plan A rider or statement of condition that allows a variable life insured to maintain policy coverage after becoming disabled is a benefit known as A) variable payments for 10 years, followed by fixed payments for life. IBM Noida, Uttar Pradesh, India1 month agoBe among the first 25 applicantsSee who IBM has hired for this roleNo longer accepting applications. 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 B)part earnings and part cost basis Question #26 of 48Question ID: 606811 This makes a total of $4,000 tax and penalty paid on the random withdrawal. View full document. D) expense guarantee. If the customer takes a withdrawal of $10,000, what are the tax consequences? C)Money market fund. continues payments only as long as all annuitants are still alive. The downside was that the buyer was exposed to market risk, which could result in losses. Immediate annuities purchase annuity units directly. All of the following are characteristics of variable annuity contracts D) Joint and last survivor annuity. In a variable life annuity with 10-year period certain, a contract holder receives: D) II and IV. Your 65-year-old client owns a nonqualified variable annuity. A)not suitable The following information about the payroll for the week ended December 303030 was obtained from the records of Vienna Co.: Salaries:Deductions:Salessalaries$670,000Incometaxwithheld$198,744Warehousesalaries110,000Socialsecuritytaxwithheld51,714Officesalaries234,000Medicaretaxwithheld15,210$1,014,000U.S. Distributed along a dermatome. 111. D) III and IV. D)separate account may consist of mutual funds. B)fixed in value until the holder retires. A separate account will invest in a number of different securities. B) accumulation units. Variable annuities provide protection from inflation because their monthly income can increase depending on the separate account's performance. The payout of an annuitized variable annuity account changes from month to month in a manner determined by which of the following? C. a) What percentage of Facebook's users are from the United States? Among annuities, variable annuities differ from fixed annuities, which provide a specific and guaranteed return. A) waiver of premium 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. The company's well-known Rock symbol is an icon of strength, stability, expertise and innovation that has stood the test of time. Underlying equity investments T, age 70, withdraws cash from a profit-sharing plan and purchases a Straight Life Annuity. Variable annuities must be registered with: Reference: 12.3.3 in the License Exam. Contributions to an IRA may be tax deductible, depending on the individual's earnings and participation in a company-sponsored qualified retirement plan. Supplemental income stream for retirement, not preservation of capital should be the catalyst to consider a VA and for anyone who may need access to the sum invested for any reason a VA would not be considered a suitable recommendation. 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. Once annuitized, the number of annuity units does not vary. These include white papers, government data, original reporting, and interviews with industry experts. Reference: 12.1.2 in the License Exam. The number of accumulation units is always fixed throughout the accumulation period. Assuming that the payroll for the last week of the year is to be paid on December 313131, journalize the following entries: Variable annuities are riskier than fixed annuities because the underlying investments may lose value. *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. B) value of annuity units. A)each annuity unit's value and the number of annuity units vary with time. Fixed Annuity: A fixed annuity is a type of annuity contract that allows for the accumulation of capital on a tax-deferred basis. *Insurance companies introduced the variable annuity as an opportunity to keep pace with inflation. You have 4 clients each expressing interest in a variable annuity contract. *Under the mortality guarantee, the insurance company assumes mortality risk by guaranteeing payments for life, though the amount of each payment is not guaranteed. "Variable Annuities: What You Should Know," Page 3. A)defined contribution plans. If the contract holder dies before the period expires, the remaining payments are made to the beneficiary. *Universal variable life policies are insurance company products that should be purchased primarily for the insurance features they offer rather than as an investment. All of the following are accurate statements to make to the client EXCEPT That can adversely affect your returns over the long term, compared with other types of investments. Reference: 12.1.2.1.1 in the License Exam. 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. Question #43 of 48Question ID: 606809 Reference: 12.1.4.2 in the License Exam. A)II and IV. *Once a variable annuity is annuitized, the accumulation units are converted into a fixed number of annuity units. A) an accounting measure used to determine payments to the owner of the variable annuity. Income that cannot be outlived by the owner C) the yield is always higher than bond yields. A) variable annuities offer the investor protection against capital loss. C)earnings only and taxable B) The death benefit cannot ever be more than the guaranteed benefit. 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. Chapter 7: Annuities Flashcards | Quizlet Spartan Technology Services and Solutions Private Limited is a subsidiary of IBM (International Business Machines) Corporation. Reference: 12.1.2.1.1. in the License Exam. Reference: 12.3.3 in the License Exam. B)I and III. B)suitable regardless of funding sources Reference: 12.3.1 in the License Exam, Question #30 of 48Question ID: 606833 They are also not considered suitable for anyone who anticipates needing a lump sum within a short time frame to fund other endeavors. On an annual basis, the machine will produce 20,000 units with an expected selling price of $10, prime costs of$6 per unit, and a fixed cost allocation of $3 per unit. B)4200. Question #15 of 48Question ID: 606804 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. Prudential's businesses offer a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds, asset management, and real estate services. C)the yield is always higher than bond yields. A registered representative recommends a variable annuity with an income rider to a client. Essential Characteristics: \hspace{7pt} a. December 303030, to record the payroll. D) II and IV. Portfolio Compliance Risk Analyst Job in Newark, NJ at Prudential A joint-and-last-survivor annuity is a payout option where: A 45-year-old investor takes a lump-sum distribution from a nonqualified variable annuity. d. Each month the payment will increase, decrease, or remain the same as the previous month's payment . B)Fixed annuity contract with a discussion regarding timing risk Solved The following are characteristics of a public | Chegg.com Do homework Doing homework can help you learn and understand the material covered in class. B)I and IV. Question #41 of 48Question ID: 606801 Reference: 12.1.2.1.2 in the License Exam. How Are Nonqualified Variable Annuities Taxed? A)the number of annuity units becomes fixed when the contract is annuitized. *A variable annuity payout is determined by comparing account performance with AIR, and this month's payout with last month's payout. B) a variable annuity contract is not required to be sold by prospectus because it is an insurance contract must be filed with FINRA. B) contact the issuer of the clients existing VA contract to facilitate the clients surrender of the contract.