Life income riders are best suited for those who anticipate a lengthy retirement and are generally not yet retired when making the VA purchase. An investor who purchases a fixed annuity contract assumes purchasing-power risk. D) not suitable because a lifetime income rider is only for someone who is already retired. One of the following would achieve that objective but a suitability discussion regarding it's risk should also occur. A prospectus for a variable annuity contract: Question #19 of 48Question ID: 606826 D) I and III. John is the annuitant in a variable plan, and Sue is the beneficiary. Single payment deferred annuity. Which 2 of the 4 client profiles would a VA be LEAST suitable for? C)annuity units. A) I and II. 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. The accumulation period of a variable annuity may continue for many years. B) A 30 year old construction worker recently unemployed who wants to invest his severance pay amounting to 9 months salary. Question #26 of 48Question ID: 606811 C)Variable annuity contract with a discussion regarding interest rate risk Periodic payments are not a consideration because normally the payments into an annuity are level or in a lump sum. A) the investment portfolio is managed professionally. Sample problems from Chapter 9 . A) Ordinary income tax on earnings exceeding basis. vote for the investment adviser. B) suitable if she has enough equity in the home to fund the variable annuity without cashing out the other VA contract A) Dow Jones Industrial Average. B)fixed in value until the holder retires. The accumulation unit's value is used to calculate the total value of the account. (The exception is the fixed income annuity, which has a moderate to high payout that rises as the annuitant ages). C) III and IV. 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 . D)II and IV. The amount taxed is the amount of the lump-sum payment minus the deceased's cost basis in the investment. She will receive the annuity's entire value in a lump-sum payment. The funds are not liquid due to the surrender fees, and there is also a 10% penalty on withdrawals before age 59-. *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) It will stay the same. The remainder of the premium is invested in the separate account. B)value of annuity units. covers more than one person. A 32-year-old with a company-sponsored 401k plan who will need a lump sum soon to finance graduate school tuition 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 Here is how guaranteed lifetime annuities work. C) single payment immediate annuity. 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. Surrender fees and penalties for early withdrawal. A)II and IV. D) A 50 year old individual with $50,000 cash to invest who has already made the maximum contributions to an IRA and the 401(k) plan at his place of employment and would like to minimize some of the tax consequences of his currently high tax bracket. Reference: 12.3.3 in the License Exam. *BEST Suited for VA-Age 56, available cash to invest, maxes out IRA and 401(k) plan VA will be supplemental income, would not be suitable for cust. A)Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. Reference: 12.3.3 in the License Exam. The tax on this is $2,800 ($10,000 x 28%). If the account is annuitized, the investor has chosen a payout option. B)I and III. a. it performs a single task b. it is self-contained and independent of other modules c. it is relatively short d. all of the above are chamcleristics of a program module 7. A variable annuity is a type of annuity contract in which the value can vary based on the performance of an u . *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. Since the client is older than 59 at the time of distribution, the additional 10% penalty tax is not incurred. The money paid in will be returned tax free, but the earnings portion will be taxed as ordinary income. A) waiver of premium Transcribed image text: 6. Can I Borrow from My Annuity for a House Down Payment? C) Universal variable life policy. 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. C) each annuity unit's value and the number of annuity units vary with time. the state banking commission. A)defined contribution plans. Question #17 of 48Question ID: 606802 B)100% taxable. is required by the Securities Act of 1933. All of the following statements regarding variable annuities are true EXCEPT: C)earnings only and taxable B)Variable annuities. The fixed payment that the annuitant receives loses purchasing power over time as a result of inflation. The accumulation unit's value is used to calculate the total value of the account. The creation of an estate. Fixed Annuity: A fixed annuity is a type of annuity contract that allows for the accumulation of capital on a tax-deferred basis. The AG49-A Revisions 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. D)I and III. How to Rollover a Variable Annuity Into an IRA. C)the SEC. B) Life annuity. 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: C) taxed as ordinary income only to the extent of earnings. The number of annuity units becomes fixed when the contract is annuitized; it is the value of each unit that fluctuates. D)It cannot be determined until the April return is calculated. D) A 50 year old individual with $50,000 cash to invest who has already made the maximum contributions to an IRA and the 401(k) plan at his place of employment and would like to minimize some of the tax consequences of his currently high tax bracket. A customer is receiving annuitized payments from a variable annuity. The client's investment objectives, tax bracket, investment experience and risk tolerance all align well with a VA recommendation. If this client is in the payout phase, how would his April payment compare to his March payment? D)suggest to the client that perhaps a loan or refinancing his vacation home might be a better way to fund the contract purchase. The beneficiary is taxed at ordinary income rates during the year the lump sum is received. The value of the annuity units varies. 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. III) A hierarchy of corporate staff evaluates divisions' plans and performance. C) 10 years of variable payments. D) a minimum of 10 years of variable payments, followed by additional variable payments for life. can be sold by someone with only an insurance license Distributed along a dermatome. *When money is deposited into the annuity, it is purchasing accumulation units. This customer has no spouse or dependents, which negates the value of the death benefit. To comply with Regulation SP, a brokerage firm is required to do all of the following EXCEPT: A) deliver an annual notice of its information collecting and sharing policies to all customers. Suggesting that loans or drawing equity from a home to fund VA contracts have also been targeted as abusive sales practices. Securely download your document with other editable templates, any time, with PDFfiller. How to Navigate Market Volatility While Saving for Retirement, Variable Annuity: Definition and How It Works, Vs. A) I and II A variable annuity is both an insurance and a securities product. For a retired person, which of the following investments would provide the greatest protection against inflation? All of the following are true about annuities EXCEPT: they have all the same characteristics as life insurance. When the second party dies, all payments cease. C) III and IV. He makes several statements regarding the contract. A) complete all paper work to purchase the annuity contract and obtain the clients signature immediately. Reference: 12.3.3 in the License Exam. a variable annuity does not guarantee an earnings rate of return. D) Variable annuities. C)not suitable because a lifetime income rider is only for someone who is already retired Final answer. Distributions to the annuitant will fluctuate during the payout period. Question #29 of 48Question ID: 606831 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. B)unsuitable because her situation exposes her to surrender charges and early withdrawal penalties in exchange for insufficient benefits. "Variable Annuities: What You Should Know," Pages 67. Based on the clients profile which of the following would be the best recommendation? He originally invested $29,000 4 years ago; it now has a value of $39,000. Of the answer choices given the best would be to reevaluate the recommendation based on the new information tendered by the client. *VAs are less suitable for individuals who have not yet made maximum contributions to other retirement accounts such as IRAs and 401ks. B)I and III. If you die before the payout phase, your beneficiaries may receive a. A)II and IV. C) none of these. While variable annuities have greater potential for earnings, since their interest rate rises and falls with their underlying investments, they can lose money. B)I and III. Your 55-year-old client invested $50,000 four years ago in a nonqualified variable annuity. Anthony Battle is a CERTIFIED FINANCIAL PLANNER professional. C)I and IV. B) II and IV. d) What is the probability that a user is from the United States, given that he or she logs on every day? Reference: 12.3.3 in the License Exam. A) Any tax due is deferred. Your client has a large sum of money to invest from the proceeds of the sale of his home. However, the web version (cat. On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity). IBM is a global brand and has its presence in 170 countries and operates . Reference: 12.1.4.1 in the License Exam. There is a guaranteed minimum interest rate, normally amounting to between 1 and 3 percent. Random withdrawals do not guarantee how long the money will last because large withdrawals can deplete the funds before the annuitant dies. withdraw funds without any tax consequences. B) a variable annuity contract is not required to be sold by prospectus because it is an insurance contract are purchased primarily for their insurance features A) Joint tenants annuity. This includes transportation, food, lodging, and entertainment. Sub accounts and mutual funds are conceptually identical, but sub accounts don't have ticker symbols that investors can easily type into a fund tracker for research purposes. You can tailor the income stream to suit your needs. do not have a separate account Variable annuities provide protection from inflation because their monthly income can increase depending on the separate account's performance. order now. *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. D)an accounting measure used to determine payments to the owner of the variable annuity. This recommendation is: C) The investor's concerns about taxes. When a partial withdrawal is made from an annuity, the earnings are considered to be taken out first for tax purposes (or LIFO). Based only on these facts, the variable annuity recommendation is Question #15 of 48Question ID: 606804 Variable annuities involve underlying equity investments in a separate account. Table1. Once the contract is annuitized, monthly payments to the customer are: B) 0. No, annuities are not FDIC-insured as they are not bank products. C) value of underlying securities held in the separate account. Because the client is older than age 59-, he does not pay 10% premature distribution penalty tax. What is her total tax liability? D)A variable annuity, Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. B) contact the issuer of the clients existing VA contract to facilitate the clients surrender of the contract. C)Life annuity. Future annuity payments will vary according to the separate account's performance. Post navigation D)A 10% penalty plus the payment of ordinary income tax on funds withdrawn in excess of the owner's basis. 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 variable annuity payout is determined by comparing account performance with AIR, and this month's payout with last month's payout. 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. Question #38 of 48Question ID: 606798 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: a variable annuity does not guarantee payments for life. Nicks Enterprises has purchased a new machine tool that will allow the company to improve the efficiency of its operations. The tax on this amount is $3,000. Question #37 of 48Question ID: 606817 C) I and III. D) II and IV. Describe. 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. PGIM Fixed Income has over $900 billion in assets under management across a broad array of fixed . That can adversely affect your returns over the long term, compared with other types of investments. 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. Determine the revenue equation given the profit and expense equations. C)the yield is always higher than bond yields. The client's investment objectives, tax bracket, investment experience and risk tolerance all align well with a VA recommendation. who needs access to the sum invested at later time. must provide full and fair disclosure. At the end of the year your account has a value of 10750. B)cost of living. B)Tax-free municipal bonds If an investor has purchased an immediate variable annuity, which of the following statements best describe the investment? A 45-year-old investor takes a lump-sum distribution from a nonqualified variable annuity. A. A) variable payments for 10 years, followed by fixed payments for life. C) III and IV. Variable annuities provide protection from inflation because their monthly income can increase depending on the separate account's performance. 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. A)2800. Reference: 12.1.4.1 in the License Exam. A) an accounting measure used to determine payments to the owner of the variable annuity. If a customer is about to buy a variable annuity contract and wants to select an annuity with a payout option providing the largest possible monthly payment, which of the following payout options would be most suitable? Though its stated return might not be as high as the other choices potential returns, only a fixed annuity fits the objective and risk averse traits of this client. A)Purchasing power risk. Distribution can take place before or during any solicitation for sale. D) expense guarantee. If an insurance holder dies sooner than expected, the insurance company will have to pay the death benefit sooner. A) I and IV. A client has purchased a nonqualified variable annuity from a commercial insurance company. C) value of underlying securities held in the separate account. Reference: 12.1.2.1.1. in the License Exam. I. A)Fixed annuity contract with a discussion regarding purchasing power risk II. a. C)none of these. Herpes Zoster has all of the following characteristics except: Group of answer choices. Once the cost basis is reached, any further withdrawals are a nontaxable return of principal. D)variable annuities. D) I and II. C) Age 40, currently unemployed Only variable annuities have payout plans that provide the client income for life. It's somewhat similar to a variable life insurance policy in that: You can choose how the product's value is invested. D)I and II. If the customer takes a withdrawal of $10,000, what are the tax consequences? When a variable annuity contract is annuitized, the number of annuity units is fixed. Withdrawals from a nonqualified variable annuity are made on a LIFO basis, so the taxable earnings are considered taken out before principal. The number of annuity units is fixed. What is the annual cash flow generated from the new machine? A) mortality guarantee. The number of annuity units rises once annuitization begins. 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. D) I and IV. In a variable life annuity with 10-year period certain, a contract holder receives: Facebook reports that 70%70 \%70% of their users are from outside the United States and that 50%50 \%50% of their users log on to Facebook daily. Future annuity payments will vary according to the separate account's performance. This cloud model is composed of five essential characteristics, three service models, and four deployment models. If at all you go deeper, then you will find a wide range of annuity products from a variety of companies. C)suitable due to the death benefit features of a variable annuity. A customer has a nonqualified variable annuity. A registered representative recommends a variable annuity with an income rider to a client. In addition, if the customer is not at least 59-, there will be a tax penalty of an additional 10%. Reference: 12.2.1 in the License Exam. A) 4000. Fixed annuities are not considered securities as return is guaranteed by the insurance company issuer. Your 65-year-old client owns a nonqualified variable annuity. In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. 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. *A variable annuity does not guarantee an earnings rate because earnings will depend on the performance of the separate account. the SEC. 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. Question #41 of 48Question ID: 606801 && \hspace{10pt}\text{Group insurance} & \underline{45,630}\\ The growth portion is taxed as a capital gain. If the annuitant dies during the accumulation period, his/her beneficiary will receive the promised annuity payments. 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. B) The policyowner. A) 2800. D) I and II. Distribution of dividends occurs during the accumulation period. D)I and III. No paper. Therefore, variable annuities must be registered with the state insurance commission and the Securities and Exchange Commission. II) It has an internal capital market wherein each division competes for funds. \text{Salaries:} && \text{Deductions:}\\ B) I and III. A prospectus for a variable annuity contract: Question #44 of 48Question ID: 606797 D) III and IV. Annuities are complicated products, so that may be easier said than done. This describes which of the following annuities? Her intent was to use the funds for the down payment on a house after graduation. Reference: 12.2.1 in the License Exam, Question #48 of 48Question ID: 606835
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