the following are all characteristics of variable annuities except: the following are all characteristics of variable annuities except:

As with all tax-deferred accounts, muni bonds are not appropriate investments because interest earned on munis is already tax exempt at the federal level. The number of accumulation units is always fixed throughout the accumulation period. B. suitable regardless of funding sources, D. suitable is she has enough equity in the home to fund the VA without cashing out the other VA contract. \hspace{5pt}\text{Expense}&&\text{Credit}&\text{Debit}\\ All of the following statements regarding variable annuities are true EXCEPT: 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. \text{Income statements accounts:}&&&\\ 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. A fixed annuity is an insurance contract that pays a guaranteed rate of interest on the owner's contributions and later provides a guaranteed income. If your customer invests in a variable annuity and chooses to annuitize at age 65, which of the following statements are TRUE? is required by the Securities Act of 1933. Question #27 of 48Question ID: 606818 A)the number of annuity units becomes fixed when the contract is annuitized. Find out how you can intelligently organize your Flashcards. Nature of the underlying investment fixed or variable, Primary purpose accumulation or pay-out (deferred or immediate), Nature of payout commitment fixed period, fixed amount or lifetime, Premium payment arrangement single premium or flexible premium. Reference: 12.2.1 in the License Exam. If the customer takes a withdrawal of $10,000, what are the tax consequences? A)II and IV. In the first year, you decide to withdraw $50,000. are purchased primarily for their insurance features Your answer, The entire $10,000 is taxable as ordinary income., was correct!. If this client is in the payout phase, how would his April payment compare to his March payment? Dividing the funds available so as to fund 2 separate contracts, whether they be joint with last survivor or life income, would not be cost efficient for spouses. The separate account is NOT likely to invest in: The earnings on dollars invested into a variable annuity accumulate tax-deferred, which is why variable annuities are popular products for retirement accumulation. Which of the following are defined as securities? The amount that is paid doesnt depend on the age (or continued life) of the person who buys the annuity; the payments depend instead on the amount paid into the annuity, the length of the payout period, and (if its a fixed annuity) an interest rate that the insurance company believes it can support for the length of the payout period. a variable annuity does not guarantee payments for life. The fund is kept within an IHT protected pension trust and can be passed down using a spousal bypass trust (SBT) can be used with personal pension plans to p Any purchase of securities will contain an element of risk. Listing tax-deferred growth as an objective for retirement income, which of the following investments is most suitable? Must provide full and fair disclosure, 2. Withdrawals from a nonqualified variable annuity are made on a LIFO basis, so the taxable earnings are considered taken out before principal. Annuities are complicated products, so that may be easier said than done. A universal variable life policy should be purchased primarily for its insurance features, not its investment features. In a fixed annuity, the insurance company guarantees the principal and a minimum rate of interest. If the contract holder dies before the period expires, the remaining payments are made to the beneficiary. A)Fixed annuity contract with a discussion regarding purchasing power risk What Are Ordinary Annuities, and How Do They Work (With Example)? The separate account performance compared to an assumed interest rate. have investment risk that is assumed by the investor. All of the following statements about variable annuities are true EXCEPT: D)Variable annuity contract with a discussion regarding legislative risk, A VA with its investments in the separate account subject to market risk would not align with the customer's objective. An annuity may be purchased under all of the following methods EXCEPT: Your answer, periodic payment immediate annuity., was correct!. The number of variable annuity accumulation units can rise during the accumulation period when additional units are being purchased. What is the taxable consequence of this withdrawal to your client? Please sign in to access member exclusive content. D)Municipal bonds. The client's investment objectives, tax bracket, investment experience and risk tolerance all align well with a VA recommendation. All of the following statements concerning a variable annuity are correct EXCEPT: The owner of a life annuity with 10-year period certain will receive payments for life, subject to a minimum of 10 years. All of the following investment strategies offer either fully or partially tax-deductible contributions to individuals who meet eligibility requirements EXCEPT: Who assumes the investment risk in a variable annuity contract? Once the contract is annuitized, monthly payments to the customer are: A customer has contributed $1,000 a year for 10 years to his tax-deferred nonqualified variable annuity. A)It will stay the same. D)suitable due to the relative safety of the investment. Variable Annuities. A)not suitable For anyone who may need access to the sum invested at a later time, a VA would not be considered a suitable recommendation. 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. These contracts come with high surrender charges. . In addition, insurer charges ten percent penalty if insured withdraw before he or she turns to fifty nigh and six month or become disabled, unless return wit Current assumption insurance is used to act like a bank; policy holders can put a good amount of money in an account to earn interest. The money paid in will be returned tax free, but the earnings portion will be taxed as ordinary income. Fixed Annuity, Retirement Annuities: Know the Pros and Cons. C)with guaranteed minimum withdrawal benefits (GMWBs) the periodic payments can be monthly, quarterly or annually "Variable Annuities: What You Should Know," Pages 67. B)IRAs. B) the rate of return is determined by the underlying portfolio's value, C) such an annuity is designed to combat inflation risk, D) the number of annuity units becomes fixed when the contract is annuitized. The growth of the annuitys value and/or the benefits paid does not depend directly or entirely on the performance of the investments the insurance company makes to support the annuity. a variable annuity guarantees payments for life. B) unsuitable because the return on something as conservative as a variable annuity tends to be low. What Are the Distribution Options for an Inherited Annuity? Changes in payments on a variable annuity correspond most closely to fluctuations in the: The following annuities are available in fixed or variable form: 1. D)II and III. Universal variable life policies are ins. All of the following are characteristics of variable whole life EXCEPT. C)insurance companies keep variable annuity funds in separate accounts from other insurance products. Your answer, The entire $10,000 is taxable as ordinary income., was correct!. A separate account will invest in a number of different securities. The # of annuity units rises once annuitization begins. People who own an immediate annuity (that is, who are receiving money from an insurance company), are afforded some protection from creditors. The contract has a schedule of surrender charges, beginning with a 7% charge in the first year, and declining by 1% each year. D) There is no tax as the withdrawal is considered return of capital. 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? Reference: 12.1.1 in the License Exam. Question #22 of 48Question ID: 606803 Reference: 12.1.2 in the License Exam. Reference: 12.3.3 in the License Exam. Question #47 of 48Question ID: 606813 Which of the following are defined as securities? The upside was the possibility of higher returns during the accumulation phase and a larger income during the payout phase. 7. Question #25 of 48Question ID: 606819 Variable annuities must be registered with: A prospectus for a variable annuity contract: When may a variable annuity account be surrendered? None of the other investments listed here offer tax-deferred growth. A)variable annuities may only be sold by registered representatives. Variable annuities are regulated by state insurance departments and the federal Securities and Exchange Commission. You can learn more about the standards we follow in producing accurate, unbiased content in our. . The annuity has grown to value of $60,000. Which of the following recommendations would best meet the customer profile? What is her total tax liability? When a VA contract is annuitized, the # of annuity units is fixed. In deciding whether to put money into a variable annuity versus some other type of investment, its worth weighing these pros and cons. B.The proceeds minus John's cost basis taxed as ordinary income at Sue's tax rate. Your customer, still working, informs you that she will be funding a VA you have recommended from 2 sources: a refinancing of her primary home where she will be able to draw out equity that has built up since it was purchased 15 years ago, and cashing out another VA that she recently purchased within the past 2 years without a lifetime income rider like the one you have recommended. A)IPO. A registered representative explaining variable annuities to a customer would be CORRECT in stating that: 1. a VA guarantees an earnings rate of return, 2. a VA does not guarantee an earnings rate of return, 4. a VA does not guarantee payments for life. Only variable annuities have payout plans that provide the client income for life. From an insurance company, mortality risk turns out unfavorably if: 1. an annuitant lives longer than expected, 2. an annuitant dies sooner than expected, 3. a life ins. C)Life annuity. It credits a minimum rate of interest, just as a fixed annuity does, but its value is also based on the performance of a specified stock indexusually computed as a fraction of that indexs total return. Suggesting that loans or drawing equity from a home to fund VA contracts have also been targeted as abusive sales practices. A)II and IV. Premiums made into the annuity purchase accumulation units. Qualified Longevity Annuity Contract (QLAC): Definition, Taxes, and Example, Present Value of an Annuity: Meaning, Formula, and Example, Future Value of an Annuity: What Is It, Formula, and Calculation, Calculating Present and Future Value of Annuities, Annuity Table: Overview, Examples, and Formulas, Present Value Interest Factor of Annuity (PVIFA) Formula, Tables. A)equity funds. Balancesheetaccounts:AssetLiabilityOwnersequity:CapitalDrawingIncomestatementsaccounts:RevenueExpenseIncreaseCreditCreditCreditDecreaseCredit(j)CreditNormalBalanceDebit. The holder of a variable annuity receives the largest monthly payments under which of the following payout options? D)A variable annuity, Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. All of the following statements regarding variable annuities are true EXCEPT: A. variable annuities may only be sold by registered representatives. Which of the following statements regarding variable annuities are TRUE? Annuity death benefits are generally paid in a lump sum. Refinancing a home to draw out equity has been identified by FINRA as an abusive sales tactic regarding the sales of VAs. D)variable annuities. \hspace{5pt}\text{Revenue}&\text{Credit}&(j)&\\ the SEC. C)complete all paper work to purchase the annuity contract and obtain the clients signature immediately. C)the number of annuity units is fixed, and their value remains fixed. co. actuaries. In a variable annuity contract, the provision that guarantees the annuitant payments for life is called the: Your answer, mortality guarantee., was correct!. Based on the client's profile, which of the following would be the best recommendation? Therefore, ordinary income taxes will apply to the entire $10,000. If you die before the payout phase, your beneficiaries may receive a. 2. C)Growth mutual funds An equity indexed annuity is a type of fixed annuity, but looks like a hybrid. An annuity factor is taken from the annuity table, which considers, for example, the investor's sex and age. Question #46 of 48Question ID: 606796 A variable annuity is a combination of 2 products: an insurance contract and a mutual fund. Your client owns a variable annuity contract with an AIR of 4%. In general, annuities have the following features. For an insurance company, mortality risk turns out unfavorably if: A variable annuity's separate account is: If your 60-year-old customer purchases a nonqualified variable annuity and withdraws some of her funds before the contract is annuitized, what are the consequences of this action? A deferred annuity is an insurance contract that promises to pay the buyer a regular stream of income, or a lump sum, at some date in the future. There is no beneficiary in the event the annuitant dies. B)variable annuities are classified as insurance products. Sub accounts and mutual funds are conceptually. All of the following statements are true regarding both mutual funds and variable annuities EXCEPT: a. the return to investors is dependent on the performance of the securities in the underlying portfolio b. the investment company act of 1940 is the regulating legislation c. distributions from the underlying mutual fund are taxable to the holder in the year the distribution is made d. the . Her intent was to use the funds for the down payment on a house after graduation. A security is any investment for profit with management performed by a third party. Money in a variable annuity is invested in a fundlike a mutual fund but one open only to investors in the insurance companys variable life insurance and variable annuities. Distribution can take place before or during any solicitation for sale. The correct answer is: Defines a securities product All of the following policy elements are not guaranteed in a variable whole life policy, EXCEPT: Select one: a. Which Earns More: Variable or Fixed Annuities? Among annuities, variable annuities differ from fixed annuities, which provide a specific and guaranteed return. \text{Owner's equity:}&&&\\ Future annuity payments will vary according to the separate account's performance. Some fixed annuities credit a higher interest rate than the minimum, via a policy dividend that may be declared by the companys board of directors, if the companys actual investment, expense and mortality experience is more favorable than was expected.