a variable annuity has which of the following characteristics

a variable annuity has which of the following characteristics

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. A) I and III. A 1 The applicant and possibly the agent initial any changes made. A) It will be higher. It may be used by nongovernmental . C) be returned to the separate account. D) II and III. C)100% tax deferred. C) IRAs. # 7 Annuities Flashcards | Quizlet A Variable Annuity has which of the following characteristics? 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. A) The policy provides a minimum guaranteed death benefit. C)none of these. B)mutual fund units. C) taxed as ordinary income only to the extent of earnings. Variable Annuity Features | Annuity Guys How to Rollover a Variable Annuity Into an IRA. Reference: 12.3.2.1 in the License Exam. 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. Variable annuities provide protection from inflation because their monthly income can increase depending on the separate account's performance. C)Corporate bonds. C)II and IV. B)unsuitable because her situation exposes her to surrender charges and early withdrawal penalties in exchange for insufficient benefits. Describe. 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. B) taxed as ordinary income. Contributions to an IRA may be tax deductible, depending on the individual's earnings and participation in a company-sponsored qualified retirement plan. B) fixed payments for 10 years, followed by variable payments for life. national origin, genetics, disability, age, veteran status, or any other characteristic protected by law. A) partially a tax-free return of capital and partially taxable. The downside was that the buyer was exposed to market risk, which could result in losses. C)the yield is always higher than bond yields. Variable Annuities Flashcards | Quizlet Variable Annuity: Definition and How It Works, Vs. Fixed Annuity B)cost of living. D) a minimum of 10 years of variable payments, followed by additional variable payments for life The paper publication will not be rereleased. What is her total tax liability? Home; About. C) II and IV. B) 0. 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) II and III. An individual retirement annuity is an investment vehiclesimilar to an individual retirement accountthat is offered by insurance companies. The separate account performance compared to last month's performance. 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. B) During the accumulation period. In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. D)Municipal bonds. A) A variable annuity You have 4 clients each expressing interest in a variable annuity contract. a variable annuity guarantees an earnings rate of return. D) II and IV. B)IRAs. A separate account will invest in a number of different securities. D)with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed, With guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is not guaranteed because payments stop when the annuitant has received an amount equal to the principal account value or the contract term ends. Are Variable Annuities Subject to Required Minimum Distributions? Therefore only a fixed annuity could be considered as suitable. Because the client is older than age 59-, he does not pay 10% premature distribution penalty tax. 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. D) Growth mutual funds. \hspace{10pt} Medicare, 1.5%1.5\%1.5% The number of annuity units varies. Reference: 12.3.3 in the License Exam. D) There is no guarantee regarding the investment results of the separate account. For a retired person, which of the following investments would provide the greatest protection against inflation? The growth portion is taxed as ordinary income. *During the accumulation phase, the number of accumulation units will increase as additional money is invested. If this client is in the payout phase, how would his April payment compare to his March payment? b. C)such an annuity is designed to combat inflation risk. 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: B)a minimum rate of return is guaranteed. A) 2800. 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. D) not suitable because a lifetime income rider is only for someone who is already retired. 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. Question #14 of 48Question ID: 606823 B) fixed in value until the holder retires. Consequently, the client pays taxes only on the growth portion of the withdrawal ($10,000). An annuity is an agreement for one person or organization to pay another a series of payments. Reference: 12.1.2 in the License Exam, Question #21 of 48Question ID: 606812 Variable Annuities Flashcards | Quizlet D) It cannot be determined until the April return is calculated. D) II and IV. 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? A) an accounting measure used to determine payments to the owner of the variable annuity. A) changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. His objective is monthly income that he can receive after he retires to supplement his small pension and social security benefits. D)II and III. Clusters of vesicles in various stages. He originally invested $29,000 4 years ago; it now has a value of $39,000. C) There is no tax as the withdrawal is considered return of capital. The remainder of the premium is invested in the separate account. a life insurance holder lives longer than expected. Fixed annuities. Variable annuities are designed to combat inflation risk. D)II and III. A)accumulation shares. (Check all that apply.) If the owner of a variable annuity dies during the accumulation period, any death benefit will: Distributions from such an annuity are computed on a LIFO basis with the income taxed first. If the customer takes a withdrawal of $10,000, what are the tax consequences? Reference: 12.2.1 in the License Exam. 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. I. Prudential Retirement Security Annuity VI is a group variable annuity (GVA) issued by Prudential Retirement Insurance and Annuity Company (PRIAC) which utilizes a Separate Account offered In addition, if the customer is not at least 59-, there will be a tax penalty of an additional 10%. Sas#8-psy 002 - Organizational Behavior Variable annuities are riskier than fixed annuities because the underlying investments may lose value. Upon John's death during the accumulation period, Sue takes a lump-sum payment. 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. D) variable annuities may only be sold by registered representatives. 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) allow customers to opt out of sharing of financial information with certain nonaffiliated firms. D)I and III. Surrender fees and penalties for early withdrawal. 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. Skylar Clarine is a fact-checker and expert in personal finance with a range of experience including veterinary technology and film studies. When the second party dies, all payments cease. Question #25 of 48Question ID: 606819 However, at the end of the period certain the payments to the named beneficiary (the spouse) will stop. Full-Time. Distribution can take place before or during any solicitation for sale. Because the client is older than age 59-, he does not pay 10% premature distribution penalty tax. *This annuity is nonqualified, which means the client has paid for it with after-tax dollars and has a basis equal to the original $29,000 investment. Question #37 of 48Question ID: 606817 Uses in Investing, Pros, and Cons, Indexed Annuity: Definition, How It Works, Yields, and Caps. In a variable life annuity with 10-year period certain, a contract holder receives: IBM is a global brand and has its presence in 170 countries and operates . The number of accumulation units is always fixed throughout the accumulation period. As part of his profile he stresses that he has had uncomfortable experiences in the past with the stock market and is not inclined to invest in anything that is based on stock market performance and would opt for principal protection instead. This includes transportation, food, lodging, and entertainment. The remainder of the premium is invested in the separate account. 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. D) I and III. The offers that appear in this table are from partnerships from which Investopedia receives compensation. He makes the following four statements, all of which are true EXCEPT *Insurance companies introduced the variable annuity as an opportunity to keep pace with inflation. continues payments only as long as all annuitants are still alive. C) 3000. B) a variable annuity contract is not required to be sold by prospectus because it is an insurance contract A) II and IV. *The owner of a life annuity with 10-year period certain will receive payments for life, subject to a minimum of 10 years. *Of the four customer profiles the individual already making the maximum retirement account contributions available to him and wanting to minimize the tax consequences of being in a high income tax bracket would be most suitable for a VA recommendation. A)100% tax free. C) 3800. D)I and III. If the client, who is in a 30% tax bracket, makes a random withdrawal of $15,000, what will the tax liability to the IRS be? used for the investment of funds paid by contract holders. Reference: 12.1.2 in the License Exam, Question #23 of 48Question ID: 901858 Reference: 12.1.2 in the License Exam. A customer has an investment objective of keeping pace with inflation while assuming moderate risk. The client's investment objectives, tax bracket, investment experience and risk tolerance all align well with a VA recommendation. The entire amount is taxed as ordinary income. B) During the accumulation period. Question #33 of 48Question ID: 606832 D) a variable annuity contract is subject to fluctuating values due to market fluctuations of the underlying separate accounts. Reference: 12.1.1 in the License Exam. B) The policyowner. The growth portion is taxed as ordinary income. How is the distribution taxed? B) contact the issuer of the clients existing VA contract to facilitate the clients surrender of the contract. An Immediate Annuity is designed to provide each of the following features, EXCEPT: The creation of an estate. 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. Each of the remaining statements are true. The holder of a variable annuity receives the largest monthly payments under which of the following payout options? Based on this information the RR should: A trend is formed from non-repetitive actions of people. An investor owning which of the following variable annuity contracts would hold accumulation units? There are two interest rates under fixed annuities. A) Life-only annuity 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. A security is any investment for profit with management performed by a third party. U.S. Securities and Exchange Commission. When may a variable annuity account be surrendered? 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. vote for the investment adviser. Insurance companies introduced the variable annuity as an opportunity to keep pace with inflation. PDF Variable Annuities: What You Should Know - SEC B) 0. The money paid in will be returned tax free, but the earnings portion will be taxed as ordinary income. The distribution of questions by topic is not intended to represent the 39) A variable annuity has the following guarantees: [PDF] Understanding your variable annuity UBS Variable annuities are long-term investment vehicles that with these securities as well insurance company and do not apply to the investment Question #19 of 48Question ID: 606826 *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. *With guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is not guaranteed because payments stop when the annuitant has received an amount equal to the principal account value or the contract term ends. \hspace{10pt} \text{Warehouse salaries} & 110,000 & \hspace{10pt} \text{Social security tax withheld} & 51,714\\ B)corporate stock. 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. The most popular type of variable annuity is a deferred annuity. A registered representative's (RR) customer is speaking of a variable life insurance contract he owns. Reference: 12.3.1 in the License Exam, Question #30 of 48Question ID: 606833 A)There is no tax as the withdrawal is considered return of capital. C)none of these. Her agent recommended she choose a variable annuity as a safe haven for the funds. During the payout period, payments are based on a fixed number of annuity units established when the contract was annuitized. How is the distribution taxed? variable annuity without paying tax at the time of the transfer. Question #17 of 48Question ID: 606802 A) Life-only annuity The growth portion is subject to a 10% penalty. She may choose to receive monthly payments for the rest of her life. \hspace{10pt} \text{Office salaries} & \underline{234,000} & \hspace{10pt} \text{Medicare tax withheld} & 15,210\\ When a variable annuity contract is annuitized, the number of annuity units is fixed. D) Two-thirds of the withdrawal is taxable as ordinary income. Reference: 12.3.3 in the License Exam. 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) suitable if she has enough equity in the home to fund the variable annuity without cashing out the other VA contract If you die before the payout phase, your beneficiaries may receive a. "Variable Annuities: What You Should Know," Page 10. C)the SEC. A)variable annuities may only be sold by registered representatives. *Once a variable annuity is annuitized, the accumulation units are converted into a fixed number of annuity units. D)partially a tax-free return of capital and partially taxable. Variable annuities were introduced in the 1950s as an alternative to fixed annuities, which offer a guaranteedbut often lowpayout during the annuitization phase. Then find the probability of the event. Flashcards - Securities and Tax - FreezingBlue However, if you take a withdrawal during the contractssurrender period, which can be as long as 15 years, youll generally have to pay a surrender fee. D) I and IV. Spartan Technology Services and Solutions Private Limited is a subsidiary of IBM (International Business Machines) Corporation. The wage for applicants for this position is $45,979.00 per year. 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. The investor purchased accumulation units. A)II and III. Your customer in his early 30s has received a modest inheritance from a relative. This guideline has been prepared for use by Federal agencies. C)Mortality risk. Generally, a life-only contract pays the most per month because payments cease at the annuitant's death. Is F&G Annuities & Life Inc (FG) a Good Dividend Stock? | AAII A 45-year-old investor takes a lump-sum distribution from a nonqualified variable annuity. C) value of underlying securities held in the separate account. C)prime rate. 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. A registered representative recommends a variable annuity with an income rider to a client. Chapter 4: Annuities Flashcards | Chegg.com 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. *As contributions are made with after-tax dollars, only the earnings generated are taxed on withdrawal. Try Variable annuities grow tax-deferred, so you dont have to pay taxes on any investment gains until you begin receiving income or make a withdrawal. a variable annuity guarantees payments for life. A registered representative explaining variable annuities to a customer would be CORRECT in stating that: D) accumulation shares. Reference: 12.3.3 in the License Exam. Nicks Enterprises has purchased a new machine tool that will allow the company to improve the efficiency of its operations. Many variable annuities invest the separate account in mutual funds. B)Fixed annuity contract with a discussion regarding timing risk Reference: 12.1.4.1 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.

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