The number of annuity units is fixed at the time of annuitization. B)unsuitable because her situation exposes her to surrender charges and early withdrawal penalties in exchange for insufficient benefits. The number of annuity units rises once annuitization begins. Each of the remaining statements are true. \hspace{10pt} \text{Sales salaries} & \$\hspace{5pt} 670,000 & \hspace{10pt} \text{Income tax withheld} & \$198,744\\ *A joint life with last survivor contract covers multiple annuitants and ceases payments at the death of the last surviving annuitant. A)contact the issuer of the clients existing VA contract to facilitate the clients surrender of the contract. You can buy an annuity with either a lump sum or a series of payments, and the accounts value will grow accordingly. *Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. A)not suitable D) The investment risk is shared between the insurance company and the policyowner. C) suggest to the client that perhaps a loan or refinancing his vacation home might be a better way to fund the contract purchase. A) Ordinary income tax on earnings exceeding basis. C) payments continue for a pre-determined period of time. \text{Salaries:} && \text{Deductions:}\\ The minimum guaranteed death benefit is provided by that portion of the payment invested in the insurance company's general account. a variable annuity does not guarantee payments for life. When the first party dies, the annuity payment is made to the survivor. Reference: 12.3.1 in the License Exam, Question #30 of 48Question ID: 606833 The value of the annuity units varies. vote on proposed changes in investment policy. The payout compared to last month's payout. Refinancing a home to draw out equity has been identified by FINRA as an abusive sales tactic regarding the sales of VAs. 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? D)It cannot be determined until the April return is calculated. C)Life annuity. The annuitized payments are viewed for tax purposes as In March, the actual net return to the separate account was 8%. A universal variable life policy should be purchased primarily for its insurance features, not its investment features. C)earnings only and taxable Assuming that the payroll for the last week of the year is to be paid on December 313131, journalize the following entries: C) with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed *A periodic payment immediate annuity is a contradiction in terms. PGIM Fixed Income has over $900 billion in assets under management across a broad array of fixed . Of the answer choices given the best would be to reevaluate the recommendation based on the new information tendered by the client. Once the cost basis is reached, any further withdrawals are a nontaxable return of principal. B)Capital gains taxation on the earnings withdrawn in excess of the owner's basis. D)suitable due to the relative safety of the investment. Question #37 of 48Question ID: 606817 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. If your customer invests in a variable annuity and chooses to annuitize at age 65, which of the following statements are TRUE? D)variable annuities. C) single payment immediate annuity. Over the past five years, 's dividend yield has averaged % per year. \hspace{7pt} b. January 444, to record the employers payroll taxes on the payroll to be paid on January 444. *Fixed income instruments, like bonds and fixed annuities, are subject to purchasing power risk. B) accumulation units. C)number of accumulation units. An investor owning which of the following variable annuity contracts would hold accumulation units? A) I and III. U.S. Securities and Exchange Commission. The client's investment objectives, tax bracket, investment experience and risk tolerance all align well with a VA recommendation. Sub accounts and mutual funds are conceptually. How Good of a Deal Is an Indexed Annuity? Do whatever you want with a Learn About Annuities and Their Myths - F&G: fill, sign, print and send online instantly. When the annuitization option is selected, each payment represents both capital and earnings. 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. 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. C) II and III. A registered representative recommends a variable annuity with an income rider to a client. B) Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. 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. C. A) I and III. She may choose to receive monthly payments for the rest of her life. A) not suitable When the first party dies, the annuity payment is made to the survivor. Question #12 of 48Question ID: 606814 A) number of annuity units. 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)money market funds. B) variable annuities. A) The entire amount is taxed as ordinary income, because it is not life insurance. There are two interest rates under fixed annuities. Your client owns a variable annuity contract with an AIR of 4%. A) It will be higher. Are Variable Annuities Subject to Required Minimum Distributions? Since the client is older than 59 at the time of distribution, the additional 10% penalty tax is not incurred. Premiums made into the annuity purchase accumulation units. Variable annuity salespeople must register with all of the following EXCEPT: A) FINRA. B) payment guarantee. 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 *The accumulation period of a variable annuity may continue for many years. D) I and III. A registered representative explaining variable annuities to a customer would be CORRECT in stating that: 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. In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. B) Exchange traded Funds (ETFs) or Exchange traded Notes (ETNs) You can learn more about the standards we follow in producing accurate, unbiased content in our. Variable annuities are riskier than fixed annuities because the underlying investments may lose value. Reference: 12.3.2.1 in the License Exam. What will this transaction provide? All of the following statements regarding variable annuities are true EXCEPT: A) variable annuities offer the investor protection against capital loss. 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. The value of a variable annuity is based on the performance of an underlying portfolio of sub accounts selected by the annuity owner. However, they are protected by state guaranty associations in the event that the insurance company providing the product goes out of business. \hspace{7pt} a. December 303030, to record the payroll. John is the annuitant in a variable plan, and Sue is the beneficiary. Job Classification: Corporate - Legal and Compliance. 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 The holder of a variable annuity receives the largest monthly payments under which of the following payout options? Inflation-hedging, using both tax deferral combined with market growth potential, is made possible by variable annuities #. With a fixed annuity, by contrast, the insurance company assumes the risk of delivering whatever return it has promised. However, it does guarantee payments for life (mortality). Contributions to an IRA may be tax deductible, depending on the individual's earnings and participation in a company-sponsored qualified retirement plan. Any withdrawals you make prior to the age of 59 may also be subject to a 10% tax penalty. *The minimum guaranteed death benefit is provided by that portion of the payment invested in the insurance company's general account. Variable annuities gave buyers a chance to benefit from rising markets by investing in a menu of mutual funds offered by the insurer. A the safety of the principal invested B the yield is always higher than bond yields. Payments from a variable annuity depend on the securities' value in the separate account's underlying investment portfolio. 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: C) II and IV. 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 passion for serving customers and a personal commitment to following through in a dynamic, fast-paced environment. C) It will stay the same. C) Unit refund life option D)0. *An immediate annuity has no accumulation period. D) I and II. \hspace{7pt} a. December 303030, to record the payroll. 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. All of the following are true about annuities EXCEPT: they have all the same characteristics as life insurance. B)corporate stock. This guideline has been prepared for use by Federal agencies. The remainder of the premium is invested in the separate account. D)I and IV. If this client is in the payout phase, how would his April payment compare to his March payment? He originally invested $29,000 4 years ago; it now has a value of $39,000. *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. B)100% taxable. The separate account performance compared to an assumed interest rate. 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. B) The investor's marital status. An important basic characteristic of common stocks that makes them a suitable type of investment for the separate account of variable annuities is: Once the cost basis is reached, any further withdrawals are a nontaxable return of principal. B) variable annuities are classified as insurance products. A) 2800. The fixed annuities, indexed annuities, and variable annuities are some of the major types of annuities, of which one may find immediate annuities and deferred annuities. Life income riders are best suited for those who anticipate a lengthy retirement and are generally not yet retired when making the VA purchase. A)IPO. Consequently, the client pays taxes only on the growth portion of the withdrawal ($10,000). B)fixed in value until the holder retires. 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 The investor has already paid tax on the contributions but the earnings have grown tax-deferred. III. When a variable annuity contract is annuitized, the number of annuity units is fixed. & \underline{\underline{\$1,014,000}} & \hspace{10pt} \text{U.S. savings bonds} & 30,420\\ 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. Once annuitized, the number of annuity units does not vary. As the name implies, the investment performance of a variable annuity's portfolio (separate account) can vary, and the investor bears the risk of any potential decline in its value. D) Variable Annuity. continues payments as long as one annuitant is alive. Over the following year, the stock fund has a 10% return, and the bond fund has a 5% return. Similarly, CDs are insured, thereby eliminating risk and guaranteeing a return. These include white papers, government data, original reporting, and interviews with industry experts. a variable annuity guarantees payments for life. C) Universal variable life policy. B)variable annuities are classified as insurance products. A) two people are covered and payments continue until the second death. A 45-year-old investor takes a lump-sum distribution from a nonqualified variable annuity. When the annuitization option is selected, each payment represents both capital and earnings. *Universal variable life policies are insurance company products that should be purchased primarily for the insurance features they offer rather than as an investment. Though there is no beneficiary designation during the annuitization, this is not an issue for this annuitant. Investopedia requires writers to use primary sources to support their work. A universal variable life policy should be purchased primarily for its insurance features, not its investment features. At the end of the year your account has a value of 10750. 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. Then find the probability of the event. A) A variable annuity C) 10% penalty plus payment of ordinary income tax on all funds withdrawn exceeding basis. Typically, they allow one withdrawal each year during the accumulation phase. C) A 10% penalty plus the payment of ordinary income tax on all of the funds withdrawn. It was a lump-sum purchase. The features of variable deferred annuities are many. C) insurance companies keep variable annuity funds in separate accounts from other insurance products. It is the starting point of motivation because they generate emotions. The most popular type of variable annuity is a deferred annuity. The original investment has grown to a value of $60,000. D)I and III. B)I and III. 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. Drives - are hardwired characteristics of the brain that correct deficiencies or maintain an internal equilibrium by producing emotions to energize individuals. C) none of these. 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 Reference: 12.1.4.1 in the License Exam. A) It will be higher. Registration with FINRA is de facto registration with the SEC; no registration is required by the state banking commission. \hspace{10pt} Federal unemployment (employer only), 0.8%0.8\%0.8%. Your customer in his early 30s has received a modest inheritance from a relative. Based on this information the RR should: Every annuity has some characteristics in common. The value of the separate account is now $30,000. 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. Of the 4 client profiles below, which might be the best suited for a variable annuity recommendation? A) mortality guarantee. D)suitable if she has enough equity in the home to fund the variable annuity without cashing out the other VA contract, Based on the information given in the question, the VA recommendation would not be suitable. B) Corporate debt securities All of the following statements about variable annuities are true EXCEPT: In the case of deferred annuities, this is often referred to as the accumulation phase. D) expense guarantee. The value of these units varies with the performance of the separate account. variable An immediate annuity consists of a Single Premium T has an annuity that guarantees an income payment for the rest of his life. D) I and III Variable annuity salespeople must be registered with FINRA and the state insurance department. *Only variable annuities have payout plans that provide the client income for life. C) suitable regardless of funding sources The amount taxed is the amount of the lump-sum payment minus the deceased's cost basis in the investment. B)part earnings and part cost basis A variable annuity does not guarantee an earnings rate because earnings will depend on the performance of the separate account. *A variable annuity does not guarantee an earnings rate because earnings will depend on the performance of the separate account. An 18-year-old, unmarried high school student sought a safe investment for a $30,000 bequest until after she graduated from college. Once the contract is annuitized, monthly payments to the customer are: The amount of the purchase payments that go into the account may be less than you paid because fees were taken out of the purchase payments. C) number of accumulation units. What is the taxable consequence of this withdrawal to your client? 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: A) I and III. Do homework Doing homework can help you learn and understand the material covered in class. III) A hierarchy of corporate staff evaluates divisions' plans and performance. A) I and II. D)the rate of return is determined by the underlying portfolio's value. A) I and II. C)insurance companies keep variable annuity funds in separate accounts from other insurance products. D)value of accumulation units. B) the state insurance department. B) 0. B) II and III. Periodic payments are not a consideration because normally the payments into an annuity are level or in a lump sum. A variable annuity is a security and must be registered with the SEC, not FINRA. Vaccine has decreased the incidence. An investor who purchases a fixed annuity contract assumes purchasing-power risk. When the contract is annuitized, the annuitant is credited with a fixed number of annuity units. 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. A)accumulation shares. Once a customer annuitizes a variable annuity, which of the following statements are TRUE? *A variable annuity may only be surrendered during the accumulation period. a) What percentage of Facebook's users are from the United States? There are also immediate annuities, which begin paying income right away. D)an accounting measure used to determine payments to the owner of the variable annuity. A customer has contributed $1,000 a year for 10 years to his tax-deferred nonqualified variable annuity. Question #38 of 48Question ID: 606798 a. The accumulation period of a variable annuity may continue for many years. A) periodic payment immediate annuity. Based only on these facts, the variable annuity recommendation is 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. B. If the annuitant dies during the accumulation period, his/her beneficiary will receive the promised annuity payments. Practice all cards. A) periodic payment immediate annuity. the SEC. Options. Immediate life annuity. D) Variable annuity. Consequently, the client pays taxes only on the growth portion of the withdrawal ($10,000). All of the following are accurate statements to make to the client EXCEPT Variable annuities are designed to combat inflation risk. B) During the accumulation period. D) Variable annuities. Full-Time. 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. Variable annuity salespeople must register with all of the following EXCEPT: Deal with mathematic Math is all about solving equations and finding the right answer. must provide full and fair disclosure. A) Fixed annuities. a variable annuity guarantees an earnings rate of return. *The investor has already paid tax on the contributions but the earnings have grown tax-deferred. D) the payout plans provide the client income for life. D) an accounting measure used to determine the contract owner's interest in the separate account. Ideally they should be funded with readily available cash rather than using funds liquidated from existing investments. 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. D) Two-thirds of the withdrawal is taxable as ordinary income. Her intent was to use the funds for the down payment on a house after graduation. Based on this information the RR should: These contracts come with high surrender charges. C) II and IV. Which of the following is not a characteristic of a program module? Contributions to an IRA may be tax deductible, depending on the individual's earnings and participation in a company-sponsored qualified retirement plan. A security is any investment for profit with management performed by a third party. C) III and IV. *Distributions from a nonqualified plan represent both a return of the original investment made in the plan with after-tax dollars (a nontaxable return of capital) and the income from that investment. Refinancing a home to draw out equity has been identified by FINRA as an abusive sales tactic regarding the sales of VAs. 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. The noble relatives of the Count d'Horn absolutely blocked up the ante-chambers of the regent, praying for mercy on the misguided youth, and alleging that he was insane . B)4200. Among annuities, variable annuities differ from fixed annuities, which provide a specific and guaranteed return.