All of the following characteristics are shared by both a mutual fund and a variable annuity's separate account EXCEPT: && \hspace{10pt}\text{Group insurance} & \underline{45,630}\\ Your client owns a variable annuity contract with an AIR of 4%. A) two people are covered and payments continue until the second death. The separate account is used for both variable life insurance and variable annuity investments. B) allow customers to opt out of sharing of financial information with certain nonaffiliated firms. A variable annuity is a type of annuity contract in which the value can vary based on the performance of an u . Annuities due are a type of annuity where payments are made at the beginning of each payment period. III. A)100% tax free. 7 - Annuities Flashcards | Quizlet 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. **Because common stocks are not fixed dollar investments, they have the opportunity to keep pace with inflation. Most annuities will not allow you to withdraw additional funds from the account once the payout phase has begun. A)II and IV. D) II and III. Question #11 of 48Question ID: 606816 The tax on this is $2,800 ($10,000 x 28%). C) number of accumulation units. D) The fact that periodic payments into the contract may increase or decrease. \hspace{7pt} a. December 303030, to record the payroll. C. *Only variable annuities have payout plans that provide the client income for life. Of the total payroll for the last week of the year, $30,000\$30,000$30,000 is subject to unemployment compensation taxes. EEO IS THE LAW . When may a variable annuity account be surrendered? a variable annuity guarantees payments for life. C) The ordinary income on the proceeds over the cost basis plus 10% of the net gain (if any) if Sue is younger than 59- years old. B) II and III One of the following would achieve that objective but a suitability discussion regarding it's risk should also occur. Therefore, variable annuities must be registered with the state insurance commission and the Securities and Exchange Commission. *As contributions are made with after-tax dollars, only the earnings generated are taxed on withdrawal. IBM is a global brand and has its presence in 170 countries and operates . Variable Annuities. Carefully look at your options when choosing an annuity. A) Money market fund. 6102.0.55.001 - Labour Statistics: Concepts, Sources and Methods, Dec 2005 11.1: Fundamentals of Annuities - Mathematics LibreTexts B) I and IV. C) Mutual fund portfolio consisting of blue chip stocks *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. *The minimum guaranteed death benefit is provided by that portion of the payment invested in the insurance company's general account. Question #32 of 48Question ID: 606815 *A periodic payment immediate annuity is a contradiction in terms. Question #36 of 48Question ID: 606805 Each of the remaining statements are true. 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. Try An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are. The growth portion is taxed as a capital gain. variable An immediate annuity consists of a Single Premium T has an annuity that guarantees an income payment for the rest of his life. Chapter 4: Annuities Flashcards | Chegg.com Question #47 of 48Question ID: 606813 Annuities are complicated products, so that may be easier said than done. B)I and III. A. \end{array} Variable annuities are designed to combat inflation risk. *During the payout period, payments are based on a fixed number of annuity units established when the contract was annuitized. a variable annuity guarantees an earnings rate of return. Question #45 of 48Question ID: 606795 In deciding whether to put money into a variable annuity versus some other type of investment, its worth weighing these pros and cons. B) life income C) value of underlying securities held in the separate account. Sample problems from Chapter 9. . D) a minimum of 10 years of variable payments, followed by additional variable payments for life All of the following are characteristics of a variable annuity, except When the second party dies, all payments cease. C) Corporate bonds. A) Life-only annuity A) Fixed Annuity These contracts come with high surrender charges. no. B) The proceeds minus John's cost basis taxed as ordinary income at Sue's tax rate. III. Simple and general annuities problems with solutions a variable annuity guarantees an earnings rate of return. A)the number of annuity units becomes fixed when the contract is annuitized. C) be returned to the separate account. Only variable annuities have payout plans that provide the client income for life. 222. C) III and IV. Listing tax-deferred growth as an objective for retirement income, which of the following investments is most suitable? Which Earns More: Variable or Fixed Annuities? 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. Travel Times Journal found that the average per person cost of a 10-day trip along the Pacific coast, per person, is $1,015. B) Municipal bonds. C) III and IV For an insurance company, mortality risk turns out unfavorably if: Reference: 12.3.3 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. a) What percentage of Facebook's users are from the United States? A) 4000. Uses in Investing, Pros, and Cons, Indexed Annuity: Definition, How It Works, Yields, and Caps. A) a minimum rate of return is guaranteed. C)III and IV. Fixed annuities pay a fixed monthly benefit which loses purchasing power if there is inflation. 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. 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. *The investor has already paid tax on the contributions but the earnings have grown tax-deferred. Once a variable annuity has been annuitized: C)Money market fund. Contributions to an IRA may be tax deductible, depending on the individual's earnings and participation in a company-sponsored qualified retirement plan. How Variable Life Insurance Works: Pros and Cons - ValuePenguin approve changes in the plan portfolio. Annuity death benefits are generally paid in a lump sum. used for the investment of funds paid by contract holders. For this potential advantage, the investor, rather than the insurance company, assumes the investment risk. Changes in payments on a variable annuity correspond most closely to fluctuations in the: Reference: 12.1.2 in the License Exam, Question #21 of 48Question ID: 606812 The money paid in will be returned tax free, but the earnings portion will be taxed as ordinary income. D) value of accumulation units. *An immediate annuity has no accumulation period. An investor who has purchased a nonqualified variable annuity has the right to: Variable annuities must be registered with: All of the following statements concerning a variable annuity are correct EXCEPT: D) variable annuities will protect an investor against capital loss. Your 65-year-old client owns a nonqualified variable annuity. Question #12 of 48Question ID: 606814 Which of the following recommendations would best meet the customer profile? If the customer takes a withdrawal of $10,000, what are the tax consequences? The work environment characteristics are normal office conditions. C) taxed as ordinary income only to the extent of earnings. Reference: 12.3.2.1 in the License Exam. b. 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. A) partially a tax-free return of capital and partially taxable. 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)I and IV. The earnings are taxable but the cost basis is returned tax free. How to Navigate Market Volatility While Saving for Retirement, Variable Annuity: Definition and How It Works, Vs. The separate account performance compared to an assumed interest rate. C)II and IV. Her intent was to use the funds for the down payment on a house after graduation. C) each annuity unit's value and the number of annuity units vary with time. D)an accounting measure used to determine payments to the owner of the variable annuity. An annuity is an insurance product that promises to pay out income at a future date based on invested funds. B)Value of each annuity unit each month. B) The death benefit cannot ever be more than the guaranteed benefit. *The owner of a life annuity with 10-year period certain will receive payments for life, subject to a minimum of 10 years. B) The policyowner. A variable annuity does not guarantee an earnings rate because earnings will depend on the performance of the separate account. What is the taxable consequence of this withdrawal to your client? II. A) Fixed annuities. A trend makes considerable influence or impact. D) cost of living. It was a lump-sum purchase. A 45-year-old investor takes a lump-sum distribution from a nonqualified variable annuity. D)value of accumulation units. D) the number of annuity units becomes fixed when the contract is annuitized. Of the four client profiles below which might be the best suited for a variable annuity recommendation? A)the yield is always higher than mortgage yields. *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. & \underline{\underline{\$1,014,000}} & \hspace{10pt} \text{U.S. savings bonds} & 30,420\\ If the owner of a variable annuity dies during the accumulation period, any death benefit will: A)the state banking commission. The following are the characteristics or the hierarchy of a trend except A. Gigatrends C. Megatrends B. Macrotrends D. Nanotrends _____11. Assuming that the payroll for the last week of the year is to be paid on December 313131, journalize the following entries: IV. The funds in an annuity are off-limits to creditors and other debt collectors. An accumulation unit in a variable annuity contract is: A)an accounting measure used to determine the contract owner's interest in the separate account. B) I and II. 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 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. C) II and IV. do not have a separate account That can adversely affect your returns over the long term, compared with other types of investments. D) I and II. Complete a blank sample electronically to save yourself time and money. A) I and II. The correct answer was: partially a tax-free return of capital and partially taxable. Both products typically have a wide range of options across equities, bonds and money market instruments. \hspace{10pt} \text{Warehouse salaries} & 110,000 & \hspace{10pt} \text{Social security tax withheld} & 51,714\\ Reference: 12.3.3 in the License Exam, Question #34 of 48Question ID: 606834 There are two interest rates under fixed annuities. A joint-and-last-survivor annuity is a payout option where: There are two elements that contribute to the value of a variable annuity: the principal, which is the amount of money you pay into the annuity, and the returns that your annuitys underlying investments deliver on that principal over the course of time. 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. D) reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. 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 value of accumulation and annuity units varies with the investment performance of the separate account. Distributed along a dermatome. An annuity is an agreement for one person or organization to pay another a series of payments. Once annuitized, the number of annuity units does not vary. A) Any tax due is deferred. IV. Reference: 12.1.2 in the License Exam, Question #23 of 48Question ID: 901858 *A variable annuity may only be surrendered during the accumulation period. A) periodic payment immediate annuity. If this client is in the payout phase, how would his April payment compare to his March payment? Reference: 12.2.1 in the License Exam. An annuity is a continuous stream of equal periodic payments from one party to another for a specified period of time to fulfill a financial obligation. Chapter 12 - Variable Annuities Flashcards | Chegg.com Question #38 of 48Question ID: 606798 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) Age 27, saving for first home. The income was deferred from tax over the plan's life, so it is taxable as ordinary income once distributed. However, the web version (cat. A joint life with last survivor annuity: Question #17 of 48Question ID: 606802 Reference: 12.1.1 in the License Exam. However, at the end of the period certain the payments to the named beneficiary (the spouse) will stop.