These include white papers, government data, original reporting, and interviews with industry experts. B) Corporate debt securities About Us D)Municipal bonds. Reference: 12.3.1 in the License Exam, Question #30 of 48Question ID: 606833 A) Age 56, available cash to invest, makes the maximum retirement plan contributions to an existing IRA and 401(k) plan A client has purchased a nonqualified variable annuity from a commercial insurance company. For an insurance company, mortality risk turns out unfavorably if: This customer has no spouse or dependents, which negates the value of the death benefit. Fixed annuities typically earn at a lower, stable rate. 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. D) Age 27, saving for first home. A)2800. B)value of annuity units. vote for the investment adviser. D) Variable annuities. Question #31 of 48Question ID: 606836 And, unlike a fixed annuity, variable annuities do not provide any guarantee that you will earn a return on your investment. When the contract is annuitized, the annuitant is credited with a fixed number of annuity units. Spartan Technology Services and Solutions Private Limited is a subsidiary of IBM (International Business Machines) Corporation. A)II and III. C)II and III. Your 65-year-old client owns a nonqualified variable annuity. D)I and III. Which of the following statements regarding variable annuities are TRUE? An investor owning which of the following variable annuity contracts would hold accumulation units? III. B)changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. These contracts come with high surrender charges. B)I and II The downside was that the buyer was exposed to market risk, which could result in losses. Only variable annuities have payout plans that provide the client income for life. B) contact the issuer of the clients existing VA contract to facilitate the clients surrender of the contract. B) the safety of the principal invested. A variable annuity is a security and must be registered with the SEC, not FINRA. Salaries:SalessalariesWarehousesalariesOfficesalaries$670,000110,000234,000$1,014,000Deductions:IncometaxwithheldSocialsecuritytaxwithheldMedicaretaxwithheldU.S. All of the following investment strategies offer either fully or partially tax-deductible contributions to individuals who meet eligibility requirements EXCEPT: B) I 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 demonstrated ability to quickly learn and continuously develop functional knowledge and an understanding of company products as well as administrative, claims, underwriting and marketing functions. C) II and III. Options. A) periodic payment immediate annuity. 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 Question #42 of 48Question ID: 606830 C)municipal bonds. Reference: 12.1.2 in the License Exam, Question #21 of 48Question ID: 606812 Similarly, CDs are insured, thereby eliminating risk and guaranteeing a return. D) the payout plans provide the client income for life. B)I and IV. C) II and IV. C) Corporate bonds. All of the following statements about variable annuities are true EXCEPT: Fixed annuities, on the other hand, provide a guaranteed return. Of the answer choices given the best would be to reevaluate the recommendation based on the new information tendered by the client. On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity). C) II and IV A customer has contributed $1,000 a year for 10 years to his tax-deferred nonqualified variable annuity. B) allow customers to opt out of sharing of financial information with certain nonaffiliated firms. Carefully look at your options when choosing an annuity. If this client is in the payout phase, how would his April payment compare to his March payment? In deciding whether to put money into a variable annuity versus some other type of investment, its worth weighing these pros and cons. How to Rollover a Variable Annuity Into an IRA. D) I and IV. At the end of the year your account has a value of 10750. Variable Annuity Advantages and Disadvantages, Guide to Annuities: What They Are, Types, and How They Work. D) Variable Annuity. A) each annuity unit's value is fixed, but the number of annuity units varies with time. Reference: 12.1.4.1 in the License Exam. However, it does guarantee payments for life (mortality). Over the following year, the stock fund has a 10% return, and the bond fund has a 5% return. B) single payment deferred annuity. no. The tax on this amount is $3,000. D)separate account may consist of mutual funds. B) accumulation units. Nicks Enterprises has purchased a new machine tool that will allow the company to improve the efficiency of its operations. The value of the customer's account is converted into annuity units if and when the customer decides to annuitize the contract. \hspace{10pt} Social security, 6%6\%6% on first $100,000\$100,000$100,000 of employee annual earnings Question #14 of 48Question ID: 606823 Upon John's death during the accumulation period, Sue takes a lump-sum payment. IBM is a global brand and has its presence in 170 countries and operates . A)II and IV. An investor who has purchased a nonqualified variable annuity has the right to: Variable annuities must be registered with: All of the following statements concerning a variable annuity are correct EXCEPT: D) variable annuities will protect an investor against capital loss. IV. D) None, because it is the proceeds from a life insurance company. During the . The fixed annuities, indexed annuities, and variable annuities are some of the major types of annuities, of which one may find immediate annuities and deferred annuities. A) I and IV. Question #20 of 48Question ID: 606808 Variable annuity Which of the following is characteristic of fixed annuities? Variable annuities offer the possibility of higher returns and greater income than fixed annuities, but theres also a risk that the account will fall in value. The number of annuity units is fixed at the time of annuitization. C)III and IV national origin, genetics, disability, age, veteran status, or any other characteristic protected by law. This cloud model is composed of five essential characteristics, three service models, and four deployment models. For example, when paying rent, the rent payment (PMT) Indexed annuity owners receive credited interest tied to the fluctuations of the linked index An immediate annuity consists of a single premium An immediate annuity has a single premium. U.S. Securities and Exchange Commission. A) two people are covered and payments continue until the second death. Full-Time. 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) with guaranteed minimum withdrawal benefits (GMWBs) the periodic payments can be monthly, quarterly or annually 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. If you need to withdraw money from the account because of a financial emergency, you may face surrender fees. However, at the end of the period certain the payments to the named beneficiary (the spouse) will stop. Reference: 12.3.2.4 in the License Exam. This includes transportation, food, lodging, and entertainment. If an investor has a fixed-annuity contract with an insurance company, which of the following risks is assumed by the investor? Transcribed image text: 6. The separate account is NOT likely to invest in: An important basic characteristic of common stocks that makes them a suitable type of investment for the separate account of variable annuities is: A) The entire amount is taxed as ordinary income, because it is not life insurance. D) each annuity unit's value varies with time, but the number of annuity units is fixed. Fixed annuities. D) tax free. 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. B) life income Consequently, the client pays taxes only on the growth portion of the withdrawal ($10,000). In addition, if the customer is not at least 59-, there will be a tax penalty of an additional 10%. C) value of underlying securities held in the separate account. *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. D)I and III. *A variable annuity is a security and must be registered with the SEC, not FINRA. 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. In March, the actual net return to the separate account was 8%. For a nonqualified variable annuity, cost basis for the annuitant would use the after-tax dollars contributed. D) Growth mutual funds. 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. Skylar Clarine is a fact-checker and expert in personal finance with a range of experience including veterinary technology and film studies. A variable annuity is a type of annuity contract in which the value can vary based on the performance of an u . An immediate annuity is designed to pay an income one time-period after the immediate annuity is bought. \hspace{10pt} \text{Sales salaries} & \$\hspace{5pt} 670,000 & \hspace{10pt} \text{Income tax withheld} & \$198,744\\ Premiums made into the annuity purchase accumulation units. Since , has paid out quarterly dividends ranging from $0.00 to $0.00 per share. Question #47 of 48Question ID: 606813 A registered person recommends the purchase of a variable annuity to one of his clients. regulated under both securities and insurance laws. The number of variable annuity accumulation units can rise during the accumulation period when additional units are being purchased. A)an accounting measure used to determine the contract owner's interest in the separate account. All of the following are true about annuities EXCEPT: they have all the same characteristics as life insurance. C) payments continue for a pre-determined period of time. B) Life annuity. D)value of accumulation units. Since the client is older than 59 at the time of distribution, the additional 10% penalty tax is not incurred. D) Joint and last survivor annuity. Question #29 of 48Question ID: 606831 C) II and III. C)I and IV. When a variable annuity contract is annuitized, the number of annuity units is fixed. B) II and III. D)I and III. C) II and IV. C) The portion of the premium invested in the insurance company's general account is used to provide for the minimum guaranteed amount of the death benefit. C) with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed As of March 03, 2023, had a relative dividend yield of % compared to the industry median of %. the agent must be licensed in both insurance and securities. C) Age 40, currently unemployed savingsbonds30,420Groupinsurance45,630$341,718\begin{array}{lrlr} D)the rate of return is determined by the underlying portfolio's value. Are There Penalties for Withdrawing Money From Annuities? When money is deposited into the annuity, it is purchasing accumulation units. A) Joint tenants annuity. The number of accumulation units can rise during the accumulation period. B)II and III. B)II and III. 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. If a customer is about to buy a variable annuity contract and wants to select an annuity with a payout option providing the largest possible monthly payment, which of the following payout options would be most suitable? &&& \underline{\underline{\$341,718}} Once a variable annuity has been annuitized: C)the SEC. What is the taxable consequence of this withdrawal to your client? During the payout period, payments are based on a fixed number of annuity units established when the contract was annuitized. What Are the Biggest Disadvantages of Annuities? A prospectus for a variable annuity contract: Reference: 12.1.1 in the License Exam. *With guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is not guaranteed because payments stop when the annuitant has received an amount equal to the principal account value or the contract term ends. D) the yield is always higher than mortgage yields. Her agent recommended she choose a variable annuity as a safe haven for the funds. B)I and III. C)number of accumulation units. D) cost of living. II. A separate account will invest in a number of different securities. A)III and IV. A) Ordinary income tax on earnings exceeding basis. D) II and III. 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