If the owner of a variable annuity dies during the accumulation period, any death benefit will: B)4200. Though there is no beneficiary designation during the annuitization, this is not an issue for this annuitant. (primary needs). An annuity payment is the dollar amount of the equal periodic payment in an annuity environment. variable annuity without paying tax at the time of the transfer. B)IRAs. All of the following characteristics are shared by both a mutual fund and a variable annuity's separate account EXCEPT: VAs, blue chip mutual fund portfolios, ETFs and ETNs are all tied to market performance in some way and have risk characteristics that would not align in terms of suitability for this client. D) III and IV. During payout, distributions will fluctuate due to performance in the separate account. 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: Investopedia requires writers to use primary sources to support their work. A) I and II "Variable Annuities: What You Should Know," Page 6. A) Age 56, available cash to invest, makes the maximum retirement plan contributions to an existing IRA and 401(k) plan Immediate life annuity with 10-year period certain. Question #13 of 48Question ID: 606822 Instructions\textsf{\textcolor{#4257b2}{Instructions}}Instructions B) The death benefit cannot ever be more than the guaranteed benefit. Many variable annuities invest the separate account in mutual funds. The client agrees to purchase the contract and informs the RR that he will be cashing out a VA he purchased 2 years ago to fund the new contract and will forward the check as soon as he receives it. The number of accumulation units is always fixed throughout the accumulation period. An accumulation unit in a variable annuity contract is: Question #28 of 48Question ID: 606821 IBM is a global brand and has its presence in 170 countries and operates . an annuitant lives longer than expected. B)I and IV. The annuitant may not contribute and withdraw simultaneously. D) Life annuity with 10-year period certain. A) The entire amount is taxed as ordinary income, because it is not life insurance. Variable annuity salespeople must be registered with FINRA and the state insurance department. 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 LATF-adopted ILVA Actuarial Guideline has an effective date of July 1, 2024 for contracts, riders or endorsements issued on or after that date. B)Value of each annuity unit each month. D) minimum guaranteed death benefit. What Are the Risks of Annuities in a Recession? III. A) two people are covered and payments continue until the second death. C)Variable annuity contract with a discussion regarding interest rate risk Needs - are goal-directed forces that people experience. III. I. IBM is a global brand and has its presence in 170 countries and operates . C) number of accumulation units. \hspace{7pt} a. December 303030, to record the payroll. D) 4500. B) suitable if she has enough equity in the home to fund the variable annuity without cashing out the other VA contract Question #35 of 48Question ID: 606810 A) Any tax due is deferred. The beneficiary is taxed at ordinary income rates during the year the lump sum is received. A)II and IV. Question #24 of 48Question ID: 606806 An annuitant assumes the investment risk of a variable annuity and is not protected byt he insurance company from capital losses. 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)II and III The funds are not liquid due to the surrender fees, and there is also a 10% penalty on withdrawals before age 59-. A variable annuity is a combination of 2 products: an insurance contract and a mutual fund. B) 10% penalty plus payment of ordinary income tax on all funds withdrawn. The client's investment objectives, tax bracket, investment experience and risk tolerance all align well with a VA recommendation. A) Fixed annuities. B)reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. B)I and III. Distributions from nonqualified variable annuities are: A customer has an investment objective of keeping pace with inflation while assuming moderate risk. c. The separate account provides for a guaranteed minimum return. \hspace{7pt} a. December 303030, to record the payroll. An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are. 10.1 This chapter addresses a number of ABS statistics relating to the economically active population which were not discussed elsewhere. C) II and III. Transcribed image text: 6. B)variable annuities are classified as insurance products. a. This makes a total of $4,000 tax and penalty paid on the random withdrawal. Consequently, the client pays taxes only on the growth portion of the withdrawal ($10,000). D)accumulation units. 8 annuities provide a guaranteed rate of return, whereas annuities provide conservative to aggressive investments whose rates of return are not guaranteed. He originally invested $29,000 4 years ago; it now has a value of $39,000. D)an accounting measure used to determine payments to the owner of the variable annuity. Changes in payments on a variable annuity correspond most closely to fluctuations in the: Licensed to sell Variable Annuities in the following state(s): FL, TX . D) I and IV. Variable annuity salespeople must register with all of the following EXCEPT: A) FINRA. II. The value of accumulation and annuity units varies with the investment performance of the separate account. A) a minimum rate of return is guaranteed. *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. 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. A guaranteed lifetime annuity promises to pay the owner an income for the rest of their life. B) prime rate. For a retired person, which of the following investments would provide the greatest protection against inflation? D)I and III. The amount taxed is the amount of the lump-sum payment minus the deceased's cost basis in the investment. C)the invested money will be professionally managed according to the issuers' investment objectives. A) changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. D)Joint and last survivor annuity. Explain what is meant by positive and negative Question #25 of 48Question ID: 606819 Periodic payment deferred annuity. Question #41 of 48Question ID: 606801 You have 4 clients each expressing interest in a variable annuity contract. The AG49-A Revisions The holder of a variable annuity receives the largest monthly payments under which of the following payout options? A) Fixed Annuity Question #11 of 48Question ID: 606816 's dividend yield was % last year. Once the cost basis is reached, any further withdrawals are a nontaxable return of principal. ($5,000) to a stock fund. 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. A) the investment portfolio is managed professionally. The separate account is NOT likely to invest in: If your customer invests in a variable annuity and chooses to annuitize at age 65, which of the following statements are TRUE? *Contributions to a nonqualified variable annuity are not tax deductible. During the accumulation phase, you make purchase payments. Question #17 of 48Question ID: 606802 The income was deferred from tax over the plan's life, so it is taxable as ordinary income once distributed. C) II and IV. Once the contract is annuitized, monthly payments to the customer are: There are also immediate annuities, which begin paying income right away. Which of the following is not a characteristic of a program module? C) II and IV. PGIM Fixed Income, a division of PGIM Inc., an SEC-registered investment adviser and a business unit of Prudential Financial, Inc. is seeking a Portfolio Risk Surveillance Analyst. The owner of a life annuity with 10-year period certain will receive payments for life, subject to a minimum of 10 years. Reference: 12.1.2 in the License Exam. If an investor has a fixed-annuity contract with an insurance company, which of the following risks is assumed by the investor? All of the following are true about annuities EXCEPT: they have all the same characteristics as life insurance. However, because the client is not yet age 59- when making the withdrawal, he also pays a 10% penalty, or $1,000. C) value of underlying securities held in the separate account. Determine the revenue equation given the profit and expense equations. A) The fact that the annuity payment may increase or decrease. Based only on these facts, the variable annuity recommendation is C) insurance companies keep variable annuity funds in separate accounts from other insurance products. For an investor, which of the following is the most important factor in determining the suitability of a variable annuity investment? B) IPO. The remainder of the premium is invested in the separate account. Securely download your document with other editable templates, any time, with PDFfiller. 222. A) be paid to a designated beneficiary. The value of an annuity unit varies from month to month according to the performance of the separate account in comparison to the assumed interest rate. The company's well-known Rock symbol is an icon of strength, stability, expertise and innovation that has stood the test of time. Among annuities, variable annuities differ from fixed annuities, which provide a specific and guaranteed return. The following changes have been incorporated into Special Publication 800145, as of the date indicated - . 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: 12.1.2.1.1 in the License Exam. D) a variable annuity contract is subject to fluctuating values due to market fluctuations of the underlying separate accounts. Immediate life annuity. All of the following statements about variable annuities are true EXCEPT: A) Money market fund. C)II and IV. Ideally they should be funded with readily available cash rather than using funds liquidated from existing investments. The anti-money laundering rules for insurance companies highlight that each insurance company - like other financial institutions subject to anti-money laundering program requirements - must develop a risk-based anti-money laundering program that identifies, assesses, and mitigates any risks of money laundering, terrorist financing, and other Drives - are hardwired characteristics of the brain that correct deficiencies or maintain an internal equilibrium by producing emotions to energize individuals. B)unsuitable because her situation exposes her to surrender charges and early withdrawal penalties in exchange for insufficient benefits. A) II and IV. A)exempt from taxes B) Life annuity. If the customer takes a withdrawal of $10,000, what are the tax consequences? 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 Reference: 12.3.3 in the License Exam. A variable annuity's separate account is: A separate account will invest in a number of different securities. 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. 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. The accumulation unit's value is used to calculate the total value of the account. The earnings on dollars invested into a variable annuity accumulate tax deferred, which is why variable annuities are popular products for retirement accumulation. These contracts cover both lives and will continue to make payments until the last spouse dies. A 45-year-old employed individual with no other retirement accounts in place When the second party dies, all payments cease. D) II and IV. A) each annuity unit's value is fixed, but the number of annuity units varies with time. A)variable annuities may only be sold by registered representatives. D) the payout plans provide the client income for life. 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. a life insurance holder lives longer than expected. *Of the four customer profiles the individual already making the maximum retirement account contributions available to him and wanting to minimize the tax consequences of being in a high income tax bracket would be most suitable for a VA recommendation. A trend is formed from non-repetitive actions of people. a variable annuity guarantees payments for life. Underlying equity investments T, age 70, withdraws cash from a profit-sharing plan and purchases a Straight Life Annuity. Reference: 12.2.1 in the License Exam. Suppose that 20%20 \%20% of their users are United States users who log on daily. D) III and IV. All of the following statements regarding variable annuities are true EXCEPT: A) variable annuities offer the investor protection against capital loss. Which is it? A)It will stay the same. Your customer in his early 30s has received a modest inheritance from a relative. Science Health Science Nursing. Post navigation The number of annuity units is fixed at the time of annuitization. B. A 32-year-old with a company-sponsored 401k plan who will need a lump sum soon to finance graduate school tuition Which of the following statements is not true about the characteristics of a trend? II. Variable annuities provide protection from inflation because their monthly income can increase depending on the separate account's performance. B)II and III. A Variable Annuity has which of the following characteristics? Nicks Enterprises has purchased a new machine tool that will allow the company to improve the efficiency of its operations. A)Joint tenants annuity. A)contact the issuer of the clients existing VA contract to facilitate the clients surrender of the contract. Consequently, the client pays taxes only on the growth portion of the withdrawal ($10,000). 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. 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. On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity). 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. If this client is in the payout phase, how would his April payment compare to his March payment? Income that cannot be outlived by the owner A variable annuity is both an insurance and a securities product. B)100% taxable. Uses in Investing, Pros, and Cons, Indexed Annuity: Definition, How It Works, Yields, and Caps. *The accumulation period of a variable annuity may continue for many years. B) 0. An individual who purchases a Life annuity is given protection against: the risk of living longer than expected The type of annuity that can be purchased with one monetary deposit is called a (n) Immediate annuity N purchases an annuity by making payments in an amount no less than $100 quarterly. an annuitant dies sooner than expected. C) Age 40, currently unemployed Which of the following is NOT an accurate statement concerning a variable life insurance contract? *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. Her intent was to use the funds for the down payment on a house after graduation. Complete a blank sample electronically to save yourself time and money. Your client owns a variable annuity contract with an AIR of 4%. It was a lump-sum purchase. In addition, if the customer is not at least 59-, there will be a tax penalty of an additional 10%. For a retired person, which of the following investments would provide the greatest protection against inflation? 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. A) waiver of premium D) I and IV. Reference: 12.1.4.1 in the License Exam. A) A variable annuity A guaranteed death benefit guarantees that the beneficiary will receive a death benefit if the annuitant dies before the annuity begins paying benefits. Before buying a variable annuity, investors should carefully read the prospectus to try to understand the expenses, risks, and formulas for calculating investment gains or losses. D) the yield is always higher than mortgage yields. required to be located off of the company's premises. 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. C) III and IV 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) I and III. D)suitable due to the relative safety of the investment. B)I and II Therefore only a fixed annuity could be considered as suitable. C) Life annuity with period certain. The value of the customer's account is converted into annuity units if and when the customer decides to annuitize the contract. 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.