must be filed with FINRA. B) Corporate debt securities B) II and III. C) a variable annuity contract does not guarantee any type of return Which is it? C) III and IV no. B) Life annuity. I. Among annuities, variable annuities differ from fixed annuities, which provide a specific and guaranteed return. 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. Trends Networks and Critical Thinking Module 2 B) II and III. D) I and III Variable annuities operate in similar ways to . 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. III) A hierarchy of corporate staff evaluates divisions' plans and performance. As part of the registration requirements, a prospectus must be filed and distributed to prospective investors. A) I and IV. B)I and IV. When the annuitization option is selected, each payment represents both capital and earnings. Variable annuities provide protection from inflation because their monthly income can increase depending on the separate account's performance. D)I and IV, Universal variable life policies are insurance company products that should be purchased primarily for the insurance features they offer rather than as an investment. C) the client assumes the investment risk. Determine the revenue equation given the profit and expense equations. 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: Reference: 12.2.1 in the License Exam, Question #48 of 48Question ID: 606835 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? A) Life-only annuity A) 4000. The number of accumulation units is always fixed throughout the accumulation period. "Variable Annuities: What You Should Know," Page 10. Which of the following is not characteristic of a fixed annuity? Guaranteed Lifetime Annuity: How They Work, When They Pay You, This is also generally true of retirement plans. The fixed payment that the annuitant receives loses purchasing power over time as a result of inflation. 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. However, a discussion should occur regarding the risks that are associated with a fixed annuity; purchasing power risk. An annuity may be purchased under all of the following methods EXCEPT: A) Age 56, available cash to invest, makes the maximum retirement plan contributions to an existing IRA and 401(k) plan C)A 10% penalty plus the payment of ordinary income tax on all of the funds withdrawn. savingsbonds30,420Groupinsurance45,630$341,718\begin{array}{lrlr} D) I and III. When the contract is annuitized, the annuitant is credited with a fixed number of annuity units. Hire Velocity hiring Customer Escalation Agent in Tampa, Florida C)Variable annuity contract with a discussion regarding interest rate risk Annuities due are a type of annuity where payments are made at the beginning of each payment period. Once a variable annuity has been annuitized: These contracts come with high surrender charges. The earnings are taxable but the cost basis is returned tax free. Transcribed image text: 6. D) each annuity unit's value varies with time, but the number of annuity units is fixed. The payout of an annuitized variable annuity account changes from month to month in a manner determined by which of the following? However, it does guarantee payments for life (mortality). D) The investment risk is shared between the insurance company and the policyowner. B) The proceeds minus John's cost basis taxed as ordinary income at Sue's tax rate. C)insurance companies keep variable annuity funds in separate accounts from other insurance products. The annuity unit's value represents a guaranteed return. 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. D)It cannot be determined until the April return is calculated. A)IPO. Life income riders are best suited for those who anticipate a lengthy retirement and are generally not yet retired when making the VA purchase. B) the state insurance department. must precede every sales presentation. The customer, in the accumulation stage of the annuity, is holding accumulation units. Instructions\textsf{\textcolor{#4257b2}{Instructions}}Instructions 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. 222. Reference: 12.1.4.1 in the License Exam. \hspace{7pt} a. December 303030, to record the payroll. A variable annuity is a combination of 2 products: an insurance contract and a mutual fund. An 18-year-old, unmarried high school student sought a safe investment for a $30,000 bequest until after she graduated from college. A)the number of annuity units becomes fixed when the contract is annuitized. C)the invested money will be professionally managed according to the issuers' investment objectives. A registered representative explaining variable annuities to a customer would be CORRECT in stating that: The separate account is used for both variable life insurance and variable annuity investments. If this client is in the payout phase, how would his April payment compare to his March payment? Only variable annuities have payout plans that provide the client income for life. Before the contract is annuitized, your client, currently age 60, withdraws some funds for personal purposes. Variable annuities were introduced in the 1950s as an alternative to fixed annuities, which offer a guaranteedbut often lowpayout during the annuitization phase. P=525p2+65,326p185,000E=326p+185,000P=-525 p^{2}+65,326 p-185,000 \quad E=-326 p+185,000P=525p2+65,326p185,000E=326p+185,000. do not have a separate account D) II and III. C) There is no tax as the withdrawal is considered return of capital. C) III and IV. C) A 10% penalty plus the payment of ordinary income tax on all of the funds withdrawn. The value of accumulation and annuity units varies with the investment performance of the separate account. The money paid in will be returned tax free, but the earnings portion will be taxed as ordinary income. 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. Describe. *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. *Payments from a variable annuity depend on the securities' value in the separate account's underlying investment portfolio. D) an accounting measure used to determine the contract owner's interest in the separate account. 5 Q All of the following are characteristics of variable whole life EXCEPT the premium is level there is no guaranteed cash value there is no guaranteed minimum death benefit. must provide full and fair disclosure. C)the yield is always higher than bond yields. B)I and II Reference: 12.2.1 in the License Exam. These contracts come with high surrender charges. The amount taxed is the amount of the lump-sum payment minus the deceased's cost basis in the investment. D) I and III. Variable annuities are riskier than fixed annuities because the underlying investments may lose value. C) II and III. B)II and III. D)I and III. A) an accounting measure used to determine payments to the owner of the variable annuity. D) a variable annuity contract is subject to fluctuating values due to market fluctuations of the underlying separate accounts. This guideline has been prepared for use by Federal agencies. 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. D)the state insurance department. The growth portion is taxed as a capital gain. A) Money market fund. Of the four client profiles below which might be the best suited for a variable annuity recommendation? *The return on a variable annuity is not guaranteed; it is determined by the underlying portfolio's value. *The investor has already paid tax on the contributions but the earnings have grown tax-deferred. 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. Which of the following statements regarding variable annuities are TRUE? Chapter 6-Classification Annuities Flashcards | Quizlet B) the rate of return is determined by the underlying portfolio's value. D)0. A Variable Annuity has which of the following characteristics? B)changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. Future annuity payments will vary according to the separate account's performance. Usually the term "annuity" relates to a contract between an individual and a life insurance company. A) a minimum rate of return is guaranteed. He originally invested $29,000 4 years ago; it now has a value of $39,000. D) I and IV. A)II and IV. approve changes in the plan portfolio. C)III and IV. C)such an annuity is designed to combat inflation risk. Once a variable annuity has been annuitized: continues payments only as long as all annuitants are still alive. Herpes Zoster has all of the following characteristics except: On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity). The downside was that the buyer was exposed to market risk, which could result in losses. C)II and IV. vote on proposed changes in investment policy. a. C) 100% tax free. Variable Annuities Flashcards | Quizlet A)the state banking commission. Options. An annuitant assumes the investment risk of a variable annuity and is not protected byt he insurance company from capital losses. Chapter 12: Variable Annuities Flashcards | Quizlet 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. Variable annuity salespeople must be registered with FINRA and the state insurance department. One of the following would achieve that objective but a suitability discussion regarding it's risk should also occur. "Variable Annuities: What You Should Know," Page 6. Can I Borrow from My Annuity for a House Down Payment? C) During the annuity period. How Good of a Deal Is an Indexed Annuity? B)100% taxable. The growth portion is taxed as a capital gain. C) with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed C) Age 40, currently unemployed A) Ordinary income tax on earnings exceeding basis. A customer has a nonqualified variable annuity. Question #33 of 48Question ID: 606832 A joint life with last survivor contract covers multiple annuitants and ceases payments at the death of the last surviving annuitant. A) Joint tenants annuity. C)3800. *Waiver of premium is a benefit available on qualified life insurance contracts, usually in the form of a rider, which provides for the waiver of premium payments that fall due while the policyholder is totally disabled. The beneficiary is taxed at ordinary income rates during the year the lump sum is received. However, it does guarantee payments for life (mortality). A)accumulation shares. B)Two-thirds of the withdrawal is taxable as ordinary income. Here is how guaranteed lifetime annuities work. A) Capital gains taxation on the earnings withdrawn in excess of the owner's basis. \hspace{10pt} Medicare, 1.5%1.5\%1.5% A variable annuity's separate account is: A separate account will invest in a number of different securities. A 45-year-old investor takes a lump-sum distribution from a nonqualified variable annuity. 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. Underlying equity investments T, age 70, withdraws cash from a profit-sharing plan and purchases a Straight Life Annuity.
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