Which of the following recommendations would best meet the customer profile? EEO IS THE LAW . \hspace{10pt} \text{Office salaries} & \underline{234,000} & \hspace{10pt} \text{Medicare tax withheld} & 15,210\\ C) payments continue for a pre-determined period of time. A) 2800. B) IPO. D)the rate of return is determined by the underlying portfolio's value. Often used for retirement planning purposes, it is meant to provide a regular (monthly, quarterly, annual) income stream, starting at some point in the future. Fixed annuities. Withdrawals from a nonqualified variable annuity are made on a LIFO basis, so the taxable earnings are considered taken out before principal. An annuity is an insurance product that promises to pay out income at a future date based on invested funds. Consequently, the client pays taxes only on the growth portion of the withdrawal ($10,000). Variable annuities are designed to combat inflation risk. B) 10% penalty plus payment of ordinary income tax on all funds withdrawn. Spartan Technology Services and Solutions Private Limited is a subsidiary of IBM (International Business Machines) Corporation. When may a variable annuity account be surrendered? A)I and IV. Transcribed image text: 6. \hspace{10pt} \text{Sales salaries} & \$\hspace{5pt} 670,000 & \hspace{10pt} \text{Income tax withheld} & \$198,744\\ If the account is annuitized, the investor has chosen a payout option. The accumulation unit's value is used to calculate the total value of the account. What Are the Risks of Annuities in a Recession? During the payout period, payments are based on a fixed number of annuity units established when the contract was annuitized. D)money market funds. 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. C)earnings only and taxable a variable annuity guarantees payments for life. A) I and III. Immediate life annuity. All of the following are accurate statements to make to the client EXCEPT Fixed annuities pay a fixed monthly benefit which loses purchasing power if there is inflation. But again, the need to designate beneficiaries is not an issue for this annuitant. Variable annuities must be registered with: *The owner of a life annuity with 10-year period certain will receive payments for life, subject to a minimum of 10 years. C) Unit refund life option D)A variable annuity, Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. At the end of the year, your account has a value of $10,750 ($5,500 in the stock fund and $5,250 in the bond fund), minus fees and charges. B)mutual fund units. The remainder of the premium is invested in the separate account. B)It will be lower. Your customer in his early 30s has received a modest inheritance from a relative. If this client is in the payout phase, how would his April payment compare to his March payment? B)value of annuity units. If the owner of a variable annuity dies during the accumulation period, any death benefit will: Annuities are complicated products, so that may be easier said than done. Variable Annuity Advantages and Disadvantages, Guide to Annuities: What They Are, Types, and How They Work. C)with guaranteed minimum withdrawal benefits (GMWBs) the periodic payments can be monthly, quarterly or annually That can adversely affect your returns over the long term, compared with other types of investments. A) Dow Jones Industrial Average. Reference: 12.1.4.2 in the License Exam. The number of accumulation units can rise during the accumulation period. Uses in Investing, Pros, and Cons, Indexed Annuity: Definition, How It Works, Yields, and Caps. However, if you take a withdrawal during the contractssurrender period, which can be as long as 15 years, youll generally have to pay a surrender fee. D)suitable due to the relative safety of the investment. A 60-year-old individual, nearing retirement who has both IRAs and a 401k in place, is comfortable with market risk associated with the stock market, and has a lump sum in cash available to fund the annuity D) Age 27, saving for first home. There is no clear answer to this. 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) Fixed annuities. A 45-year-old employed individual with no other retirement accounts in place D) variable annuities may only be sold by registered representatives. 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. As part of his profile he stresses that he has had uncomfortable experiences in the past with the stock market and is not inclined to invest in anything that is based on stock market performance and would opt for principal protection instead. Variable annuities were introduced in the 1950s as an alternative to fixed annuities, which offer a guaranteedbut often lowpayout during the annuitization phase. A) I and II. D) III and IV. \end{array} D)I and II. C)3800. The number of annuity units rises once annuitization begins. IV. None of the other investments listed here offer tax-deferred growth. The offers that appear in this table are from partnerships from which Investopedia receives compensation. Following the transition to T+1 in the U.S. markets, Commission staff will continue to work with industry leaders, public interest advocates, investors and other regulators to assess the future feasibility of a T+0 settlement standard cycle, and seek to identify ways to overcome the challenges associated with such a move, as articulated in the . B)fixed in value until the holder retires. As part of the registration requirements, a prospectus must be filed and distributed to prospective investors. When the first party dies, the annuity payment is made to the survivor. II. Question #18 of 48Question ID: 606827 D) The fact that periodic payments into the contract may increase or decrease. 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. You purchase a variable annuity contract by making either a single purchase payment or a series of purchase payments. A. A variable annuity is a type of annuity contract in which the value can vary based on the performance of an u . the SEC. An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are. B) be paid to any legal heirs as recognized by the annuitant's state of domicile. order now. *During the payout period, payments are based on a fixed number of annuity units established when the contract was annuitized. B)II and III. C) III and IV. Based on the information given in the question, the VA recommendation would not be suitable. The growth portion is subject to a 10% penalty. A)the number of annuity units becomes fixed when the contract is annuitized. Because the client is older than age 59-, he does not pay 10% premature distribution penalty tax. He wants to ensure that the client, in addition to meeting suitability requirements, is aware of certain variable annuity contract characteristics. As the name implies, the investment performance of a variable annuity's portfolio (separate account) can vary, and the investor bears the risk of any potential decline in its value. How is the distribution taxed? 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. A)I and IV. Classifying annuities There are many categories of annuities. 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 #11 of 48Question ID: 606816 Reference: 12.3.3 in the License Exam. *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)Joint and last survivor annuity. 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. C) Corporate bonds. *When a variable contract is annuitized (distributed in regular payments, not as a lump sum), the number of accumulation units is multiplied by the unit value to arrive at the account's current value. A registered representative's (RR) customer is speaking of a variable life insurance contract he owns. B) II and III. D) Life annuity with 10-year period certain. An annuity factor is taken from the annuity table, which considers, for example, the investor's sex and age. A) I and II. Lifetime vs. fixed period annuities C)The entire $10,000 is taxable as ordinary income. the state banking commission. B) During the accumulation period. Question #44 of 48Question ID: 606797 Your 65-year-old client owns a nonqualified variable annuity. How does an indexed annuity differ from a fixed annuity? C)A 10% penalty plus the payment of ordinary income tax on all of the funds withdrawn. A prospectus for a variable annuity contract: He originally invested $29,000 4 years ago; it now has a value of $39,000. Reference: 12.1.2 in the License Exam. 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 C)II and III. \hspace{10pt} \text{Warehouse salaries} & 110,000 & \hspace{10pt} \text{Social security tax withheld} & 51,714\\ 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. Annuities due are a type of annuity where payments are made at the beginning of each payment period. B)variable annuities are classified as insurance products. C) taxed as ordinary income only to the extent of earnings. A 3 C)II and IV. As with most retirement account options, withdrawals before the age of 59 will result in a 10% tax penalty. Most annuities will not allow you to withdraw additional funds from the account once the payout phase has begun. externalities. Complete a blank sample electronically to save yourself time and money. B) single payment deferred annuity. If an insurance holder dies sooner than expected, the insurance company will have to pay the death benefit sooner. D) I and II. A) each annuity unit's value is fixed, but the number of annuity units varies with time. An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are. A) The fact that the annuity payment may increase or decrease. variable An immediate annuity consists of a Single Premium T has an annuity that guarantees an income payment for the rest of his life. 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. B) During the accumulation period. B) The entire $10,000 is taxable as ordinary income. A) Age 56, available cash to invest, makes the maximum retirement plan contributions to an existing IRA and 401(k) plan In March, the actual net return to the separate account was 8%. do not have a separate account D) Variable Annuity. Fixed annuities, on the other hand, provide a guaranteed return. For example, if the income is monthly, the first payment comes one month after the immediate annuity is bought. A) changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. \hspace{7pt} a. December 303030, to record the payroll. Home; About. *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. A) II and III. The downside was that the buyer was exposed to market risk, which could result in losses. Assuming that the payroll for the last week of the year is to be paid on January 444 of the following fiscal year, journalize the following entries: Question #16 of 48Question ID: 606807 Essential Characteristics: The growth portion is subject to a 10% penalty. Future annuity payments will vary according to the separate account's performance. Distributed along a dermatome. B)I and IV. variable annuity without paying tax at the time of the transfer. must be filed with FINRA. Based only on these facts, the variable annuity recommendation is A)unsuitable because the return on something as conservative as a variable annuity tends to be low. e) Are From the United States and Log on every day independently? B) Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. A) The entire amount is taxed as ordinary income, because it is not life insurance. A) number of annuity units. D)Dow Jones Industrial Average. It is the starting point of motivation because they generate emotions. Determine whether the following events are independent or dependent. c) Construct a contingency table showing all the joint and marginal probabilities. A) Joint tenants annuity. A)Fixed annuities. C) Tax-free municipal bonds 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) early annuity phase-in If the annuitant dies during the accumulation period, his/her beneficiary will receive the promised annuity payments. D) I and IV 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? Which 2 of the 4 client profiles would a VA be LEAST suitable for? A) a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero Reference: 12.1.2 in the License Exam, Question #39 of 48Question ID: 721469 A) II and III. Reference: 12.3.2.1 in the License Exam. 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. A)variable annuities will protect an investor against capital loss. Question #43 of 48Question ID: 606809 Ideally they should be funded with readily available cash rather than using funds liquidated from existing investments. Immediate annuities purchase annuity units directly. B)reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. The annuitized payments are viewed for tax purposes as You can tailor the income stream to suit your needs. Post navigation In the case of deferred annuities, this is often referred to as the accumulation phase. The holder of a variable annuity receives the largest monthly payments under which of the following payout options? Your 55-year-old client invested $50,000 four years ago in a nonqualified variable annuity. A) The fact that the annuity payment may increase or decrease. 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? Fixed Annuity, Retirement Annuities: Know the Pros and Cons. The entire amount is taxed as ordinary income. *A variable annuity is a security and must be registered with the SEC, not FINRA. Once a customer annuitizes a variable annuity, which of the following statements are TRUE? A)equity funds. Instructions\textsf{\textcolor{#4257b2}{Instructions}}Instructions *VAs are less suitable for individuals who have not yet made maximum contributions to other retirement accounts such as IRAs and 401ks. D) periodic payment deferred annuity. B)corporate stock. Sub accounts and mutual funds are conceptually. A universal variable life policy should be purchased primarily for its insurance features, not its investment features. Question #45 of 48Question ID: 606795 The payout compared to the initial payout upon annuitization. Reference: 12.3.1 in the License Exam. 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. B) a variable annuity contract is not required to be sold by prospectus because it is an insurance contract U.S. Securities and Exchange Commission. A) I and II IBM is a global brand and has its presence in 170 countries and operates . A universal variable life policy should be purchased primarily for its insurance features, not its investment features. III. C) 3800. D) I and IV. D) reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. CDs insured by the FDIC. Annual depreciation on the machine is$12,000, and the tax rate of the company is 25%. A) waiver of premium C) single payment immediate annuity. A client has purchased a nonqualified variable annuity from a commercial insurance company. Then find the probability of the event. A)not suitable The owner of a life annuity with 10-year period certain will receive payments for life, subject to a minimum of 10 years. B) prime rate. are purchased primarily for their insurance features A) two people are covered and payments continue until the second death. The number of annuity units is fixed. A guaranteed lifetime annuity promises to pay the owner an income for the rest of their life. The AG49-A Revisions The growth portion is taxed as a capital gain. A) The policy provides a minimum guaranteed death benefit. $63,000 b.$51,000 c. $18,000 d.$6,000. Upon John's death during the accumulation period, Sue takes a lump-sum payment. Do homework Doing homework can help you learn and understand the material covered in class. While there is no guarantee on how investments in the separate account will perform, depending on its investment performance, the separate account could provide for a larger death benefit than the minimum guaranteed amount. A) 4000. D) II and IV. D)an accounting measure used to determine payments to the owner of the variable annuity. a life insurance holder lives longer than expected. 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. ($5,000) to a stock fund. The money paid in will be returned tax free, but the earnings portion will be taxed as ordinary income. B)part earnings and part cost basis A) be paid to a designated beneficiary. With regard to a variable annuity, all of the following may vary EXCEPT: B)I and IV. Reference: 12.3.3 in the License Exam, Question #34 of 48Question ID: 606834 C) be returned to the separate account. A) There is no risk in a variable annuity. B) Life annuity with period certain B) A 30 year old construction worker recently unemployed who wants to invest his severance pay amounting to 9 months salary. D) Keogh plans. A) variable annuities offer the investor protection against capital loss. C) suggest to the client that perhaps a loan or refinancing his vacation home might be a better way to fund the contract purchase. B) II and IV. The amount of the purchase payments that go into the account may be less than you paid because fees were taken out of the purchase payments. B) a variable annuity contract is not required to be sold by prospectus because it is an insurance contract C)It will be higher. 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: Therefore, variable annuities must be registered with the state insurance commission and the Securities and Exchange Commission. Variable annuity salespeople must register with all of the following EXCEPT: A) FINRA. A joint life with last survivor annuity: All of the following statements about variable annuities are true EXCEPT: C) suitable regardless of funding sources C) with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed a variable annuity guarantees an earnings rate of return. a variable annuity does not guarantee payments for life. Science Health Science Nursing. Reference: 12.3.4 in the License Exam, Chapter 16: U.S. Government and State Rules a, Chapter 17: Other SEC and SRO Rules and Regul, Chapter 15: Ethics, Recommendations, and Taxa, Chapter 13: Direct Participation Programs, Fundamentals of Financial Management, Concise Edition, Joe B. Hoyle, Thomas F. Schaefer, Timothy S. Doupnik, Carl Warren, James M Reeve, Jonathan E. Duchac. You can learn more about the standards we follow in producing accurate, unbiased content in our. The amount taxed is the amount of the lump-sum payment minus the deceased's cost basis in the investment. Describe. 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 life insurance holder dies sooner than expected. Question #42 of 48Question ID: 606830 Fixed income instruments, like bonds and fixed annuities, are subject to purchasing power risk. B)Variable annuities. A customer has contributed $1,000 a year for 10 years to his tax-deferred nonqualified variable annuity. Based on the clients profile which of the following would be the best recommendation? C) Universal variable life policy. The annuity unit's value represents a guaranteed return. Your 65-year-old client owns a nonqualified variable annuity. B) 0. Because common stocks are not fixed dollar investments, they have the opportunity to keep pace with inflation. For an investor, which of the following is the most important factor in determining the suitability of a variable annuity investment? Skylar Clarine is a fact-checker and expert in personal finance with a range of experience including veterinary technology and film studies. (The exception is the fixed income annuity, which has a moderate to high payout that rises as the annuitant ages). Variable annuities involve underlying equity investments in a separate account. C) taxed as ordinary income only to the extent of earnings. D)Investment risk. What Are the Biggest Disadvantages of Annuities? Reference: 12.1.4.1 in the License Exam. An investor who purchases a fixed annuity contract assumes purchasing-power risk. 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 45-year-old investor takes a lump-sum distribution from a nonqualified variable annuity. *Once a variable annuity is annuitized, the accumulation units are converted into a fixed number of annuity units. 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. a variable annuity does not guarantee an earnings rate of return. Question #20 of 48Question ID: 606808 IV. Insurance companies introduced the variable annuity as an opportunity to keep pace with inflation. A trend is formed from non-repetitive actions of people. On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity). A) defined contribution plans. D)II and IV. B) payment guarantee. A customer has a nonqualified variable annuity. When a variable contract is annuitized (distributed in regular payments, not as a lump sum), the number of accumulation units is multiplied by the unit value to arrive at the account's current value. A) III and IV. Therefore, ordinary income taxes will apply to the entire $10,000. For a retired person, which of the following investments would provide the greatest protection against inflation? B) the number of annuity units is fixed, and their value remains fixed. C) 100% tax free. Licensed to sell Variable Annuities in the following state(s): FL, TX . Contributions to an IRA may be tax deductible, depending on the individual's earnings and participation in a company-sponsored qualified retirement plan. is required by the Securities Act of 1933. Reference: 12.2.1 in the License Exam.
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