2019 Ted Fund Donors She may choose to receive monthly payments for the rest of her life. A) The entire amount is taxed as ordinary income, because it is not life insurance. Needs - are goal-directed forces that people experience. A) periodic payment immediate annuity. C)number of accumulation units. B)4200. II. D) the number of annuity units becomes fixed when the contract is annuitized. D) I and III. U.S. Securities and Exchange Commission. *Since this is a nonqualified annuity (with no tax deduction), the client pays taxes only on the growth portion or, in this case, $10,000. Based only on these facts, the variable annuity recommendation is *The number of variable annuity accumulation units can rise during the accumulation period when additional units are being purchased. This role is also eligible for annual short-term incentive compensation. Of the 4 client profiles below, which might be the best suited for a variable annuity recommendation? A) number of annuity units. A)number of annuity units. B) The policyowner. No software installation. C) value of underlying securities held in the separate account. Full-Time. 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? D)II and III. Because common stocks are not fixed dollar investments, they have the opportunity to keep pace with inflation. Fixed income instruments, like bonds and fixed annuities, are subject to purchasing power risk. Similarly, CDs are insured, thereby eliminating risk and guaranteeing a return. B)II and III. Many variable annuities invest the separate account in mutual funds. 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. Reference: 12.1.2 in the License Exam. C) annuity units. Upon John's death during the accumulation period, Sue takes a lump-sum payment. C) number of accumulation units. a variable annuity does not guarantee payments for life. A) It will be higher. What Are the Distribution Options for an Inherited Annuity? B)fixed in value until the holder retires. Your client has $50,000 to invest. When the second party dies, all payments cease. B)I and IV. None of the other investments listed here offer tax-deferred growth. D)I and II. When the annuitization option is selected, each payment represents both capital and earnings. A variable annuity is a combination of 2 products: an insurance contract and a mutual fund. A registered representative explaining variable annuities to a customer would be CORRECT in stating that: The wage for applicants for this position is $45,979.00 per year. have investment risk that is assumed by the investor Fixed annuities pay a fixed monthly benefit which loses purchasing power if there is inflation. 's dividend yield was % last year. C)100% tax deferred. Expert Answer. When money is deposited into the annuity, it is purchasing accumulation units. In addition, an element of risk must be present. a variable annuity does not guarantee an earnings rate of return. Distribution can take place before or during any solicitation for sale. Contributions to a nonqualified variable annuity are not tax deductible. A) variable annuities offer the investor protection against capital loss. Variable Annuity Advantages and Disadvantages, Guide to Annuities: What They Are, Types, and How They Work. During the . Listing tax-deferred growth as an objective for retirement income, which of the following investments is most suitable? Fixed Annuity: A fixed annuity is a type of annuity contract that allows for the accumulation of capital on a tax-deferred basis. D)Variable annuity. D) The investment risk is shared between the insurance company and the policyowner. D)Joint and last survivor annuity. For example, when paying rent, the rent payment (PMT) The creation of an estate. Among annuities, variable annuities differ from fixed annuities, which provide a specific and guaranteed return. Question #47 of 48Question ID: 606813 The accumulation unit's value is used to calculate the total value of the account. The return on a variable annuity is not guaranteed; it is determined by the underlying portfolio's value. An 18-year-old, unmarried high school student sought a safe investment for a $30,000 bequest until after she graduated from college. Which of the following recommendations would best meet the customer profile? B)Capital gains taxation on the earnings withdrawn in excess of the owner's basis. 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, Present Value Interest Factor of Annuity (PVIFA) Formula, Tables. Distribution can take place before or during any solicitation for sale. 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. 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? It's somewhat similar to a variable life insurance policy in that: You can choose how the product's value is invested. Reasonable accommodations may be made to enable individuals with disabilities to perform the essential functions. How Good of a Deal Is an Indexed Annuity? The value of the customer's account is converted into annuity units if and when the customer decides to annuitize the contract. The offers that appear in this table are from partnerships from which Investopedia receives compensation. Based on this information the RR should: Question #31 of 48Question ID: 606836 The $30,000 contract value represents $10,000 of contributions and $20,000 of earnings. Options. *The owner of a life annuity with 10-year period certain will receive payments for life, subject to a minimum of 10 years. can be sold by someone with only an insurance license 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. *The investor has already paid tax on the contributions but the earnings have grown tax-deferred. View full document. There is a guaranteed minimum interest rate, normally amounting to between 1 and 3 percent. B) 10% penalty plus payment of ordinary income tax on all funds withdrawn. A client has purchased a nonqualified variable annuity from a commercial insurance company. D) a minimum of 10 years of variable payments, followed by additional variable payments for life In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. A registered representative's (RR) customer is speaking of a variable life insurance contract he owns. C) each annuity unit's value and the number of annuity units vary with time. *During the payout period, payments are based on a fixed number of annuity units established when the contract was annuitized. The funds are not liquid due to the surrender fees, and there is also a 10% penalty on withdrawals before age 59-. An Immediate Annuity is designed to provide each of the following features, EXCEPT: The creation of an estate. A) I and III. Reference: 12.3.3 in the License Exam. *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. Are Variable Annuities Subject to Required Minimum Distributions? A 58-year-old individual near retirement who is in good health and anticipates a lengthy retirement A variable annuity's separate account is: A) used for the investment of monies paid by variable annuity contract holders B) separate from the insurance company's general investments C) operated in a manner similar to an investment company D) as much a security as it is an insurance product All of the above D)II and IV. A) II and III. D) the yield is always higher than mortgage yields. used for the investment of funds paid by contract holders. D)an accounting measure used to determine payments to the owner of the variable annuity. For a retired person, which of the following investments would provide the greatest protection against inflation? A) I and III. D) II and III. A) A variable annuity B) variable annuities. Variable annuities gave buyers a chance to benefit from rising markets by investing in a menu of mutual funds offered by the insurer. Consequently, the client pays taxes only on the growth portion of the withdrawal ($10,000). FINRA. Reference: 12.3.2.1 in the License Exam. An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are. A) Fixed annuities. At the end of the year your account has a value of 10750. vote on proposed changes in investment policy. Question #29 of 48Question ID: 606831 A) The fact that the annuity payment may increase or decrease. B) Life annuity. However, because the client is not yet age 59- when making the withdrawal, he also pays a 10% penalty, or $1,000. Suppose that 20%20 \%20% of their users are United States users who log on daily. B) I and III. Variable annuity salespeople must register with all of the following EXCEPT: A)contact the issuer of the clients existing VA contract to facilitate the clients surrender of the contract. \hspace{10pt} Medicare, 1.5%1.5\%1.5% Instructions\textsf{\textcolor{#4257b2}{Instructions}}Instructions A variable annuity has two phases: an accumulation phase and a payout (annuitization) phase. A registered representative recommends a variable annuity with an income rider to a client. The value of accumulation and annuity units varies with the investment performance of the separate account. \hspace{10pt} State unemployment (employer only), 3.8%3.8\%3.8% It is innate and universal. The most popular type of variable annuity is a deferred annuity. Premiums made into the annuity purchase accumulation units. Variable annuities are riskier than fixed annuities because the underlying investments may lose value. D) 100% tax deferred. However, it does guarantee payments for life (mortality). C) I and III. C) III and IV. Your customer is interested in a variable annuity but is unclear on some of the details regarding different specifications and riders that can be attached to the contract. variable annuity without paying tax at the time of the transfer. *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. D) Variable Annuity. C)II and IV. D)the safety of the principal invested. *When money is deposited into the annuity, it is purchasing accumulation units. The value of these units varies with the performance of the separate account. Immediate life annuity with 10-year period certain. Her agent recommended she choose a variable annuity as a safe haven for the funds. D) I and III B) The entire $10,000 is taxable as ordinary income. approve changes in the plan portfolio. When a variable annuity contract is annuitized, the number of annuity units is fixed. You can learn more about the standards we follow in producing accurate, unbiased content in our. A) I and IV. Question #42 of 48Question ID: 606830 Your customer in his early 30s has received a modest inheritance from a relative. Question #22 of 48Question ID: 606803 Which of the following is not a characteristic of a program module? Universal variable life policies They are more suitable for individuals who can fund the annuity with cash, want to supplement existing retirement benefits they have already funded, are comfortable with the market risk associated with a VA separate account portfolio and anticipate a long retirement. C) 100% tax free. C)Variable annuity contract with a discussion regarding interest rate risk While variable annuities have greater potential for earnings, since their interest rate rises and falls with their underlying investments, they can lose money. The upside was the possibility of higher returns during the accumulation phase and a larger income during the payout phase. The value of a variable annuity is based on the performance of an underlying portfolio of sub accounts selected by the annuity owner.

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