B) The entire $10,000 is taxable as ordinary income. Based on this information the RR should: Reference: 12.1.2.1.1 in the License Exam. Herpes Zoster has all of the following characteristics except: Group of answer choices. The investor has already paid tax on the contributions but the earnings have grown tax-deferred. 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. Skylar Clarine is a fact-checker and expert in personal finance with a range of experience including veterinary technology and film studies. Full-Time. The beneficiary is taxed at ordinary income rates during the year the lump sum is received. The number of accumulation units is always fixed throughout the accumulation period. Question #31 of 48Question ID: 606836 C)II and III. Sample problems from Chapter 9 . $63,000 b.$51,000 c. $18,000 d.$6,000. C) a variable annuity contract does not guarantee any type of return c) Construct a contingency table showing all the joint and marginal probabilities. The owner of a life annuity with 10-year period certain will receive payments for life, subject to a minimum of 10 years. The investor purchased accumulation units. B) The proceeds minus John's cost basis taxed as ordinary income at Sue's tax rate. A)number of annuity units. 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. C) IRAs. B)I and III. The trial of the assassins commenced on the following day; and the evidence being so clear, they were both found guilty, and condemned, to be broken alive on the wheel. 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. \hspace{7pt} b. December 303030, to record the employers payroll taxes on the payroll to be paid on December 313131. must precede every sales presentation. All of the following are characteristics of a variable annuity, except: a. Once the contract is annuitized, monthly payments to the customer are: A 45-year-old investor takes a lump-sum distribution from a nonqualified variable annuity. *A variable annuity payout is determined by comparing account performance with AIR, and this month's payout with last month's payout. How to Navigate Market Volatility While Saving for Retirement, Variable Annuity: Definition and How It Works, Vs. D)Variable annuity. III. Reference: 12.3.1 in the License Exam, Question #30 of 48Question ID: 606833 B)Value of each annuity unit each month. Variable annuities are designed to combat inflation risk. The number of annuity units varies. Because the client is older than age 59-, he does not pay 10% premature distribution penalty tax. When the contract is annuitized, the annuitant is credited with a fixed number of annuity units. Transcribed image text: 6. Surrender fees and penalties for early withdrawal. If an investor has a fixed-annuity contract with an insurance company, which of the following risks is assumed by the investor? B)I and IV. Question: The following are characteristics of a public conglomerate: I) It is designed to operate various divisions for the long run. C)annuity units. However, at the end of the period certain the payments to the named beneficiary (the spouse) will stop. A)II and IV. Variable Annuity Advantages and Disadvantages, Guide to Annuities: What They Are, Types, and How They Work. Reference: 12.1.4.1 in the License Exam. If the customer takes a withdrawal of $10,000, what are the tax consequences? *As contributions are made with after-tax dollars, only the earnings generated are taxed on withdrawal. It's somewhat similar to a variable life insurance policy in that: You can choose how the product's value is invested. B)a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero A)the number of annuity units becomes fixed when the contract is annuitized. For example, if the income is monthly, the first payment comes one month after the immediate annuity is bought. D) an accounting measure used to determine the contract owner's interest in the separate account. B) II and III. a. Variable annuities should be considered long-term investments due to the limitations on withdrawals. A) partially a tax-free return of capital and partially taxable. A variable annuity is both an insurance and a securities product. A)II and IV. The growth portion is subject to a 10% penalty. D) Variable annuity. C) There is no tax as the withdrawal is considered return of capital. The amount taxed is the amount of the lump-sum payment minus the deceased's cost basis in the investment. This chapter was updated on 15 December, 2005. A) I and II C)III and IV The growth portion is subject to a 10% penalty. Of the answer choices given the best would be to reevaluate the recommendation based on the new information tendered by the client. 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. The $30,000 contract value represents $10,000 of contributions and $20,000 of earnings. 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. Spartan Technology Services and Solutions Private Limited is a subsidiary of IBM (International Business Machines) Corporation. C)prime rate. Annuities are similar to other forms of investing in that the owner invests money with the hope that it will gain in value, but annuities also come with higher fees than most mutual funds. Question #15 of 48Question ID: 606804 Determine the revenue equation given the profit and expense equations. D) II and IV. A customer, who has contributed to an IRA and to an employer matching 401(k) plan continuously for many years, wants to purchase an annuity contract to add additional monthly income once retired. How is the distribution taxed? A) the investment portfolio is managed professionally. A) I and II D) a variable annuity contract is subject to fluctuating values due to market fluctuations of the underlying separate accounts. The value of accumulation and annuity units varies with the investment performance of the separate account. B) variable annuities. C)insurance companies keep variable annuity funds in separate accounts from other insurance products. C) the client assumes the investment risk. C) II and III. Variable annuity salespeople must register with all of the following EXCEPT: Which of the following are defined as securities? Annual depreciation on the machine is$12,000, and the tax rate of the company is 25%. Contributions to a nonqualified variable annuity are not tax deductible. C) The investor's concerns about taxes. A customer has an investment objective of keeping pace with inflation while assuming moderate risk. The number of annuity units rises once annuitization begins. D) not suitable because a lifetime income rider is only for someone who is already retired. B) 0. Options. Distributions from such an annuity are computed on a LIFO basis with the income taxed first. Deferred Annuity Definition, Types, How They Work, What Is a Fixed Annuity? Variable annuity Which of the following is characteristic of fixed annuities? The client's investment objectives, tax bracket, investment experience and risk tolerance all align well with a VA recommendation. The upside was the possibility of higher returns during the accumulation phase and a larger income during the payout phase. A) II and IV. . 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 *During the payout period, payments are based on a fixed number of annuity units established when the contract was annuitized. The amount taxed is the amount of the lump-sum payment minus the deceased's cost basis in the investment. Based on the clients profile which of the following would be the best recommendation? Indexed annuity owners receive credited interest tied to the fluctuations of the linked index An immediate annuity consists of a single premium An immediate annuity has a single premium. These contracts cover both lives and will continue to make payments until the last spouse dies. When the annuitization option is selected, each payment represents both capital and earnings. A) 2800. D)suitable due to the relative safety of the investment. C) insurance companies keep variable annuity funds in separate accounts from other insurance products. B) the rate of return is determined by the underlying portfolio's value. must precede every sales presentation. Drives - are hardwired characteristics of the brain that correct deficiencies or maintain an internal equilibrium by producing emotions to energize individuals. *Universal variable life policies are insurance company products that should be purchased primarily for the insurance features they offer rather than as an investment. 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 state insurance commission. Distributions from such an annuity are computed on a LIFO basis with the income taxed first. C)complete all paper work to purchase the annuity contract and obtain the clients signature immediately. He originally invested $29,000 4 years ago; it now has a value of $39,000. B) Life 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? Needs - are goal-directed forces that people experience. A 3 C) I and III. 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 b. B) suitable if she has enough equity in the home to fund the variable annuity without cashing out the other VA contract Post navigation When the annuitization option is selected, each payment represents both capital and earnings. Once a variable annuity has been annuitized: An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are. A)the state banking commission. Ted's Bio; Fact Sheet; Hoja Informativa Del Ted Fund; Ted Fund Board 2021-22; 2021 Ted Fund Donors; Ted Fund Donors Over the Years. A) each annuity unit's value is fixed, but the number of annuity units varies with time. There is a guaranteed minimum interest rate, normally amounting to between 1 and 3 percent. A customer is receiving annuitized payments from a variable annuity. II. D) Variable annuity. 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 A)Fixed annuities. How Are Nonqualified Variable Annuities Taxed? D) expense guarantee. 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. This includes transportation, food, lodging, and entertainment. 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. Reference: 12.1.4 in the License Exam. However, it does guarantee payments for life (mortality). The client's investment objectives, tax bracket, investment experience and risk tolerance all align well with a VA recommendation. Question #35 of 48Question ID: 606810 A) not suitable D) None, because it is the proceeds from a life insurance company. He wants to ensure that the client, in addition to meeting suitability requirements, is aware of certain variable annuity contract characteristics. Variable annuity salespeople must register with all of the following EXCEPT: An annuity may be purchased under all of the following methods EXCEPT: The number of accumulation units can rise during the accumulation period. The minimum guaranteed death benefit is provided by that portion of the payment invested in the insurance company's general account. Question #29 of 48Question ID: 606831 II. The following are the characteristics or the hierarchy of a trend except A. Gigatrends C. Megatrends B. Macrotrends D. Nanotrends _____11. View full document. 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. A) variable annuities offer the investor protection against capital loss. B)mutual fund units. 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. C)II and IV. I. 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. D)Municipal bonds. Reference: 12.1.2 in the License Exam. Variable annuities are riskier than fixed annuities because the underlying investments may lose value. Annuity units are units of ownership when the contract is in the payout stage. A)II and IV. "Variable Annuities: What You Should Know," Page 3. A guaranteed death benefit guarantees that the beneficiary will receive a death benefit if the annuitant dies before the annuity begins paying benefits. an annuitant dies sooner than expected. When a variable annuity contract is annuitized, the number of annuity units is fixed. C)I and IV. D) the yield is always higher than mortgage yields. "Variable Annuities: What You Should Know," Pages 67. A single lump-sum investment is made, and payments begin immediately, since the investor has purchased annuity units. The holder of a variable annuity receives the largest monthly payments under which of the following payout options? The return on a variable annuity is not guaranteed; it is determined by the underlying portfolio's value. A registered person recommends the purchase of a variable annuity to one of his clients. A) A variable annuity *The investor has already paid tax on the contributions but the earnings have grown tax-deferred. Annuity death benefits are generally paid in a lump sum. D)partially a tax-free return of capital and partially taxable. IV. C) II and IV. Similarly, CDs are insured, thereby eliminating risk and guaranteeing a return. Accumulation Period of Fixed Annuities During this period, premiums are credited with interest which accumulates on a yearly basis. DR:BASSANT ADEL 9 QUIZ CH 6 Choose the correct answer: 1-Insurance policy benefits are classified on an insurance company's balance sheet as A. liabilities, because the insurance company may have to pay out the benefits B. assets, because policy benefits are valuable to the company C. liabilities, because customers may fall behind on their premium payments D. assets, because policy benefits . D) Keogh plans. A) Capital gains taxation on the earnings withdrawn in excess of the owner's basis. 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. B) Exchange traded Funds (ETFs) or Exchange traded Notes (ETNs) D)the safety of the principal invested. If an insurance holder dies sooner than expected, the insurance company will have to pay the death benefit sooner. Reference: 12.1.2.1.1. in the License Exam. About Us Each of the remaining statements are true. D) each annuity unit's value varies with time, but the number of annuity units is fixed. 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? "Variable Annuities: What You Should Know," Page 10. The offers that appear in this table are from partnerships from which Investopedia receives compensation. A)not suitable When may a variable annuity account be surrendered? B) Age 78, retired for 20 years, lives comfortably and wants to leave all liquid assets to children Life with period certain will produce a smaller check for life because the insurance company will guarantee payments to a beneficiary for a certain period of time designated in the contract should the annuitant die within that period. A client has purchased a nonqualified variable annuity from a commercial insurance company. Therefore only a fixed annuity could be considered as suitable. Because this is not guaranteed, the policyowner bears the investment risk. B) 0. Of the total payroll for the last week of the year, $30,000\$30,000$30,000 is subject to unemployment compensation taxes. Question #43 of 48Question ID: 606809 D) Variable annuities. A the safety of the principal invested B the yield is always higher than bond yields. A)variable annuities will protect an investor against capital loss. 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. During the accumulation phase, you make purchase payments. A)each annuity unit's value and the number of annuity units vary with time. If the contract holder dies before the period expires, the remaining payments are made to the beneficiary. The income was deferred from tax over the plan's life, so it is taxable as ordinary income once distributed. D)II and III. B) payments continue until the death of the primary owner. Travel Times Journal found that the average per person cost of a 10-day trip along the Pacific coast, per person, is $1,015. Since the client is older than 59 at the time of distribution, the additional 10% penalty tax is not incurred. a variable annuity guarantees payments for life. A)accumulation shares. What is the taxable consequence of this withdrawal to your client? 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 . She will receive the annuity's entire value in a lump-sum payment. All of the following statements concerning a variable annuity are correct EXCEPT: What is her total tax liability? D) each annuity unit's value varies with time, but the number of annuity units is fixed. Reference: 12.3.3 in the License Exam. Immediate life annuity with 10-year period certain. In a variable annuity contract, the provision that guarantees the annuitant payments for life is called the: The number of annuity units is fixed at the time of annuitization. B) II and IV. 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: Question #36 of 48Question ID: 606805 \hspace{10pt} \text{Warehouse salaries} & 110,000 & \hspace{10pt} \text{Social security tax withheld} & 51,714\\ D) Any time before the accumulation period. On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity). Any withdrawals you make prior to the age of 59 may also be subject to a 10% tax penalty. Consequently, the client pays taxes only on the growth portion of the withdrawal ($10,000). D)variable annuities. A) an accounting measure used to determine payments to the owner of the variable annuity. \hspace{10pt} Social security, 6%6\%6% on first $100,000\$100,000$100,000 of employee annual earnings 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. These contracts come with high surrender charges. Reference: 12.2.1 in the License Exam. The figure below illustrates a six-month annuity with monthly payments. Question #13 of 48Question ID: 606822 must provide full and fair disclosure. A)It will stay the same. When the first party dies, the annuity payment is made to the survivor. B) the state insurance department. *Insurance companies introduced the variable annuity as an opportunity to keep pace with inflation. How does an indexed annuity differ from a fixed annuity? 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. B)changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. During the accumulation phase, the number of accumulation units will increase as additional money is invested. In addition, if the customer is not at least 59-, there will be a tax penalty of an additional 10%. If this client is in the payout phase, how would his April payment compare to his March payment? C) taxed as ordinary income only to the extent of earnings. D) I and IV. Reference: 12.3.3 in the License Exam, Question #34 of 48Question ID: 606834 Word bank:Fixed, Variable Fixedannuities provide a guaranteed rate of return, whereas Variableannuities provide conservative to aggressive investments whose rates of return are not guaranteed. 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. The second phase is triggered when the annuity owner asks the insurer to start the flow of income, often referred to as the payout phase. 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 customer has contributed $1,000 a year for 10 years to his tax-deferred nonqualified variable annuity. is required by the Securities Act of 1933. Annuities are complicated products, so that may be easier said than done. She will receive the annuity's entire value in a lump-sum payment. 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. When the second party dies, all payments cease. C) Mutual fund portfolio consisting of blue chip stocks Assuming that the payroll for the last week of the year is to be paid on December 313131, journalize the following entries: Describe. A) waiver of premium How to Rollover a Variable Annuity Into an IRA. A) I and II A) The policy provides a minimum guaranteed death benefit. &&& \underline{\underline{\$341,718}} The number of accumulation units can rise during the accumulation period. D) I and III. What type of annuity has a cash value that is based upon the performance of it's underlying investment funds? It was a lump-sum purchase. Try Payments from a variable annuity depend on the securities' value in the separate account's underlying investment portfolio. An annuity factor is taken from the annuity table, which considers, for example, the investor's sex and age. The separate account performance compared to last month's performance. A)I and IV. 222. 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. . guarantees payments for a certain period of time. A) mortality guarantee. Question #19 of 48Question ID: 606826 The money paid in will be returned tax free, but the earnings portion will be taxed as ordinary income. C)Variable annuity contract with a discussion regarding interest rate risk A)II and III D)II and IV. In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. None of the other investments listed here offer tax-deferred growth. *Once a variable annuity is annuitized, the accumulation units are converted into a fixed number of annuity units. A universal variable life policy should be purchased primarily for its insurance features, not its investment features. For a retired person, which of the following investments would provide the greatest protection against inflation? This would not align with the couple's criteria for coverage as long as they both live. D) I and III. A) complete all paper work to purchase the annuity contract and obtain the clients signature immediately. Your 55-year-old client invested $50,000 four years ago in a nonqualified variable annuity. *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. 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. Reference: 12.2.1 in the License Exam, Question #48 of 48Question ID: 606835 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. Reference: 12.3.3 in the License Exam. 's dividend yield was % last year. A) a minimum rate of return is guaranteed. Reasonable accommodations may be made to enable individuals with disabilities to perform the essential functions. A)an accounting measure used to determine the contract owner's interest in the separate account.
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