Distributions to the annuitant will fluctuate during the payout period. Your customer, still working, informs you that she will be funding a variable annuity you have recommended from 2 sources: a refinancing of her primary home where she will be able to draw out equity that has built up since it was purchased 15 years ago, and cashing out another variable annuity that she recently purchased within the past 2 years without a lifetime income rider like the one you have recommended. B)corporate stock. C)I and III. An annuity is an agreement for one person or organization to pay another a series of payments. \text{Salaries:} && \text{Deductions:}\\ B) II and IV. C)complete all paper work to purchase the annuity contract and obtain the clients signature immediately. D)I and III. While a variable annuity has the benefit of tax-deferred growth, its annual expenses are likely to be much higher than the expenses of a typical mutual fund. It is innate and universal. How to Rollover a Variable Annuity Into an IRA. With regard to a variable annuity, all of the following may vary EXCEPT: An annuitant assumes the investment risk of a variable annuity and is not protected by the insurance company from capital losses. This compensation may impact how and where listings appear. D) Life annuity with 10-year period certain. Guaranteed Lifetime Annuity: How They Work, When They Pay You, This is also generally true of retirement plans. must precede every sales presentation. D) 4500. 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. A)Fixed annuities. The earnings on dollars invested into a variable annuity accumulate tax deferred, which is why variable annuities are popular products for retirement accumulation. He makes the following four statements, all of which are true EXCEPT C) none of these. Reference: 12.1.2 in the License Exam. e) Are From the United States and Log on every day independently? Reference: 12.1.2.1.2 in the License Exam. A) a variable annuity contract will provide a fluctuating monthly check upon the annuitization of the contract C) III and IV Do whatever you want with a Learn About Annuities and Their Myths - F&G: fill, sign, print and send online instantly. In addition, an element of risk must be present. Once annuitized, the number of annuity units does not vary. Income that cannot be outlived by the owner Your client has a large sum of money to invest from the proceeds of the sale of his home. An investor who purchases a fixed annuity contract assumes purchasing-power risk. The separate account performance compared to last month's performance. withdraw funds without any tax consequences. The $30,000 contract value represents $10,000 of contributions and $20,000 of earnings. However, they are protected by state guaranty associations in the event that the insurance company providing the product goes out of business. Your client has $50,000 to invest. On any device & OS. Immediate annuities purchase annuity units directly. *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. B)Capital gains taxation on the earnings withdrawn in excess of the owner's basis. Contributions to a nonqualified variable annuity are not tax deductible. B)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. Reference: 12.1.4.2 in the License Exam. A) Fixed Annuity A) II and IV. *Payments from a variable annuity depend on the securities' value in the separate account's underlying investment portfolio. *The accumulation period of a variable annuity may continue for many years. The downside was that the buyer was exposed to market risk, which could result in losses. Question #26 of 48Question ID: 606811 C) be returned to the separate account. B)I and IV. For example, when paying rent, the rent payment (PMT) . $63,000 b.$51,000 c. $18,000 d.$6,000. D) value of accumulation units. Periodic payments are not a consideration because normally the payments into an annuity are level or in a lump sum. An important basic characteristic of common stocks that makes them a suitable type of investment for the separate account of variable annuities is: A) be paid to a designated beneficiary. Reference: 12.2.1 in the License Exam. *The investor has already paid tax on the contributions but the earnings have grown tax-deferred. Fixed Annuity, Retirement Annuities: Know the Pros and Cons. *Once a variable annuity is annuitized, the accumulation units are converted into a fixed number of annuity units. The annuity unit's value represents a guaranteed return. Based on this information the RR should: When the annuitization option is selected, each payment represents both capital and earnings. 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. If an investor has a fixed-annuity contract with an insurance company, which of the following risks is assumed by the investor? A) Fixed annuities. Annuities due are a type of annuity where payments are made at the beginning of each payment period. Changes in payments on a variable annuity correspond most closely to fluctuations in the: The annuitized payments are viewed for tax purposes as D) 4200. a variable annuity guarantees an earnings rate of return. D) Variable annuity. have investment risk that is assumed by the investor Question #45 of 48Question ID: 606795 Carefully look at your options when choosing an annuity. B)a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero U.S. Securities and Exchange Commission. The holder of a variable annuity receives the largest monthly payments under which of the following payout options? When the annuitization option is selected, each payment represents both capital and earnings. Suggesting that loans or drawing equity from a home to fund VA contracts have also been targeted as abusive sales practices. Which of the following statements regarding variable annuities are TRUE? Future annuity payments will vary according to the separate account's performance. Distributed along a dermatome. B)fixed in value until the holder retires. A) a minimum rate of return is guaranteed. is required by the Securities Act of 1933. B)I and III. Before the contract is annuitized, your client, currently age 60, withdraws some funds for personal purposes. B)100% taxable. 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. used to escrow late or otherwise delinquent premium payments. who needs access to the sum invested at later time. D) I and III. And, unlike a fixed annuity, variable annuities do not provide any guarantee that you will earn a return on your investment. The entire amount is taxed as ordinary income. If this client is in the payout phase, how would his April payment compare to his March payment? Question #11 of 48Question ID: 606816 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 A) periodic payment immediate annuity. C)prime rate. C) A 10% penalty plus the payment of ordinary income tax on all of the funds withdrawn. C) such an annuity is designed to combat inflation risk. A)a lifetime withdrawal benefit (LWB) or lifetime income benefit is generally in the form of a rider attached to the contract which will come at a cost to the annuitant D) cost of living. Reference: 12.2.1 in the License Exam. Variable annuities operate in similar ways to . Deferred Annuity Definition, Types, How They Work, What Is a Fixed Annuity? *Mortality risk- If an annuitant lives longer than expected, the insurance company will have to continue payments longer than expected. In March, the actual net return to the separate account was 8%. B)Variable annuities. He wants to ensure that the client, in addition to meeting suitability requirements, is aware of certain variable annuity contract characteristics. A) an accounting measure used to determine payments to the owner of the variable annuity. Life Insurance vs. Annuity: What's the Difference? B)fixed in value until the holder retires. A)the number of annuity units becomes fixed when the contract is annuitized. A) I and II. A)II and IV. D)A 10% penalty plus the payment of ordinary income tax on funds withdrawn in excess of the owner's basis. A) partially a tax-free return of capital and partially taxable. 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? There is no clear answer to this. In the case of deferred annuities, this is often referred to as the accumulation phase. What Are the Distribution Options for an Inherited Annuity? A variable annuity is both an insurance and a securities product. In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. The work environment characteristics are normal office conditions. When the annuitization option is selected, each payment represents both capital and earnings. B) the client may vote for the board of directors or board of managers. An annuity factor is taken from the annuity table, which considers, for example, the investor's sex and age. D) I and III. Reference: 12.1.2 in the License Exam, Question #39 of 48Question ID: 721469 Variable annuities were introduced in the 1950s as an alternative to fixed annuities, which offer a guaranteedbut often lowpayout during the annuitization phase. Future annuity payments will vary according to the separate account's performance. The tax on this amount is $3,000. externalities. c) Construct a contingency table showing all the joint and marginal probabilities. 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)II and III This recommendation is: D) unsuitable because her situation exposes her to surrender charges and early withdrawal penalties in exchange for insufficient benefits. D) I and III. This includes transportation, food, lodging, and entertainment. *A variable annuity payout is determined by comparing account performance with AIR, and this month's payout with last month's payout. 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. Of the 4 client profiles below, which might be the best suited for a variable annuity recommendation? A customer has a nonqualified variable annuity. None of the other investments listed here offer tax-deferred growth. C) 3800. Therefore, ordinary income taxes will apply to the entire $10,000. U.S. Securities and Exchange Commission. 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. A variable annuity is a tax-deferred retirement vehicle that allows you to choose from a selection of investments and then pays you a level of income in retirement that is determined by the performance of the investments you choose. A) 2800. B) Corporate debt securities Home; About. A) be paid to a designated beneficiary. A) I and II Which is it? Transcribed image text: 6. D)an accounting measure used to determine payments to the owner of the variable annuity. Based only on these facts, the variable annuity recommendation is Registration with FINRA is de facto registration with the SEC; no registration is required by the state banking commission. A) A variable annuity A) two people are covered and payments continue until the second death. All of the following statements about variable annuities are true EXCEPT: 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. D) It cannot be determined until the April return is calculated. C)II and III. B) the number of annuity units is fixed, and their value remains fixed. C)I and IV. 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. They are also not considered suitable for anyone who anticipates needing a lump sum within a short time frame to fund other endeavors. 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. C) Universal variable life policy. A)Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. A variable annuity does not guarantee an earnings rate because earnings will depend on the performance of the separate account. Fixed annuities pay a fixed monthly benefit which loses purchasing power if there is inflation. The value of the separate account is now $30,000. B) suitable if she has enough equity in the home to fund the variable annuity without cashing out the other VA contract