the following are all characteristics of variable annuities except:

He originally invested $29,000 4 years ago; it now has a value of $39,000. C)with guaranteed minimum withdrawal benefits (GMWBs) the periodic payments can be monthly, quarterly or annually B)I and III. The tax on this is $2,800 ($10,000 x 28%). A separate account will invest in a number of different securities. For anyone who may need access to the sum invested at a later time, a VA would not be considered a suitable recommendation. Investopedia requires writers to use primary sources to support their work. 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)2800. All of the following are characteristics of a variable annuity, except. Suggesting that loans or drawing equity from a home to fund VA contracts have also been targeted as abusive sales practices. This recommendation is: A) suitable due to the relative safety of the investment. If you need to withdraw money from the account because of a financial emergency, you may face surrender fees. A 45-year-old investor takes a lump-sum distribution from a nonqualified variable annuity. The pooling is unique to annuities, and its what enables annuity companies to be able to guarantee a lifetime income. \text{Balance sheet accounts:}\\ A)II and IV. C)II and III. Universal variable life policies That can adversely affect your returns over the long term, compared with other types of investments. Flexible premium annuities A flexible premium annuity is an annuity that is intended to be funded by a series of payments. When money is deposited into the annuity, it is purchasing accumulation units. Please select the correct language below. The growth portion is subject to a 10% penalty. This customer has no spouse or dependents, which negates the value of the death benefit. Your answer, The entire $10,000 is taxable as ordinary income., was correct!. Reference: 12.1.4.2 in the License Exam. Each of the remaining statements are true. This customer has no spouse or dependents, which negates the value of the death benefit. A)the yield is always higher than mortgage yields. co. will have to continue payments longer than expected. variable annuity is a contract between you and an insurance company, under which the insurer agrees to make periodic pay-ments to you, beginning either immediately or at some future date. Variable Annuities Flashcards | Quizlet Variable annuities provide protection from inflation because their monthly income can increase depending on the separate account's performance. The amount taxed is the amount of the lump-sum payment minus the deceased's cost basis in the investment. C)annuity units. A)contact the issuer of the clients existing VA contract to facilitate the clients surrender of the contract. D)I and IV. What is her total tax liability? All of the following statements about variable annuities are true EXCEPT: C. variable annuities will protect an investor against capital loss. If your customer invests in a variable annuity and chooses to annuitize at age 65, which of the following statements are TRUE? SIE Final #2 Flashcards | Quizlet Many variable annuities invest the separate account in mutual funds. B) Any tax due is deferred. B)a majority vote from the shareholders is required to change the investment objectives. Chapter 12: Variable Annuities. An accumulation unit in a variable annuity contract is: D)suitable due to the relative safety of the investment. 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. In the case of deferred annuities, this is often referred to as the accumulation phase. a variable annuity guarantees payments for life. The growth portion is taxed as a capital gain. A registered representative recommends a variable annuity with an income rider to a client. Question #22 of 48Question ID: 606803 However, at the end of the period certain the payments to the named beneficiary (the spouse) will stop. Many variable annuities invest the separate account in mutual funds. Which of the following recommendations would BEST meet the customer profile? A policyholder will make a lump sum payment or a series of payments in exchange for a guaranteed amount of income. a variable annuity does not guarantee an earnings rate of return. The entire amount is taxed as ordinary income. \hspace{5pt}\text{Capital}&\text{Credit}&&\\ All Rights Reserved. by jmacewe, If an investor has purchased an immediate variable annuity, which of the following statements best describe the investment? D)I and III. If the owner of a variable annuity dies during the accumulation period, any death benefit will: Your answer, be paid to a designated beneficiary., was correct!. Reference: 12.3.4 in the License Exam. Her agent recommended she choose a variable annuity as a safe haven for the funds. Fixed period annuities A fixed period annuity pays an income for a specified period of time, such as ten years. holder lives longer than expected, 4. a life ins. The $30,000 contract value represents $10,000 of contributions and $20,000 of earnings. 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. B)a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero She may choose to receive monthly payments for the rest of her life. Copyright 2023, Insurance Information Institute, Inc. 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. A)an accounting measure used to determine the contract owner's interest in the separate account. Reference: 12.1.2 in the License Exam, Question #39 of 48Question ID: 721469 C)3800. An annuity factor is taken from the annuity table, which considers, for example, the investor's sex and age. In a fixed annuity, the insurance company guarantees the principal and a minimum rate of interest. A variable annuity does not guarantee an earnings rate because earnings will depend on the performance of the separate account. Under the terms of the plan, money paid into the annuity is not included in taxable income for the year in which it is paid. Having a supplemental income stream for retirement and keeping pace with inflation should be the reasons to consider a VA as suitable, but not preservation of capital. However, they are protected by state guaranty associations in the event that the insurance company providing the product goes out of business. D)separate account may consist of mutual funds. Qualified annuities A qualified annuity is one used to invest and disburse money in a tax-favored retirement plan, such as an IRA or Keogh plan or plans governed by Internal Revenue Code sections 401(k), 403(b) or 457. Her intent was to use the funds for the down payment on a house after graduation. 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. Only variable annuities have payout plans that provide the client income for life. But again, the need to designate beneficiaries is not an issue for this annuitant. D) unsuitable because her situation exposes her to surrender charges and early withdrawal penalties in exchange for insufficient benefits. Question #45 of 48Question ID: 606795 Future annuity payments will vary according to the separate account's performance. A customer, who has contributed to an IRA and to an employer matching 401(k) plan continuously for many years, wants to purchase an annuity contract to add additional monthly income once retired. C)A 10% penalty plus the payment of ordinary income tax on all of the funds withdrawn. There are two elements that contribute to the value of a variable annuity: the principal, which is the amount of money you pay into the annuity, and the returns that your annuitys underlying investments deliver on that principal over the course of time. Single premium annuities A single premium annuity is an annuity funded by a single payment. D)the state insurance department. Distribution can take place before or during any solicitation for sale. they have all the same characteristics as life insurance An Immediate Annuity is designed to provide each of the following features, EXCEPT: The creation of an estate Your client has a large sum of money to invest from the proceeds of the sale of his home. co., assumes the investment risk. D)Dow Jones Industrial Average. All other tax provisions that apply to nonqualified annuities also apply to qualified annuities. Fixed vs. Variable Annuities: Key Differences - Yahoo Finance B) a VA contract is not required to be sold by prospectus because it is an ins. C)the payout plans provide the client income for life. Lifetime annuities A lifetime annuity provides income for the remaining life of a person (called the annuitant). All of the following statements are true regarding both mutual funds and variable annuities EXCEPT: a. the return to investors is dependent on the performance of the securities in the underlying portfolio b. the investment company act of 1940 is the regulating legislation c. distributions from the underlying mutual fund are taxable to the holder in the year the distribution is made d. the . C)the yield is always higher than bond yields. Reference: 12.3.3 in the License Exam, Question #34 of 48Question ID: 606834 An equity indexed annuity is a type of fixed annuity, but looks like a hybrid. The nature of the securities invested in-bonds and growth stocks-makes it necessary that sales representatives and their principals be licensed in securities as well as insurance. There is no beneficiary in the event the annuitant dies. Which of the following statements regarding variable annuities are TRUE? Moreover, the minimum withdrawal requirements for annuities are much more liberal than they are for 401(k)s and IRAs. Variable annuities grow tax-deferred, so you dont have to pay taxes on any investment gains until you begin receiving income or make a withdrawal. When the contract is annuitized, the annuitant is credited with a fixed number of annuity units. All of the following are characteristics of a variable annuity, except continues payments as long as one annuitant is alive. Changes in payments on a variable annuity correspond most closely to fluctuations in the: A guaranteed period commits the insurance company to continue payments after the owner dies to one or more designated beneficiaries; the payments continue to the end of the stated guaranteed periodusually 10 or 20 years (measured from when the owner started receiving the annuity payments). Variable annuities must be registered with: A variable annuity is a combination of 2 products: an insurance contract and a mutual fund. Must precede every sales presentation. In concept, the payments come from three pockets: The original investment, investment earnings and money from a pool of people in the investors group who do not live as long as actuarial tables forecast. continues payments as long as all annuitants are alive. SIE Practice Exam #2 (score 93%) Flashcards | Quizlet The following annuities are available in fixed or variable form: 1. It is a variable annuity. B)reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. The # of annuity units rises once annuitization begins. If the contract holder dies before the period expires, the remaining payments are made to the beneficiary. used to escrow late or otherwise delinquent premium payments. A prospectus for a variable annuity contract: A)Fixed annuity contract with a discussion regarding purchasing power risk [B]The holders may vote to change investment objectives. Of the 4 client profiles below, which might be the best suited for a variable annuity recommendation? Moreover, annuity benefits that pass to beneficiaries dont go through probate and arent governed by the annuity owners will. When you visit the site, Dotdash Meredith and its partners may store or retrieve information on your browser, mostly in the form of cookies. Typically, they allow one withdrawal each year during the accumulation phase. A)the state banking commission. An important basic characteristic of common stocks that makes them a suitable type of investment for the separate account of variable annuities is: Your answer, changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices., was correct!. Generally, a life only contract pays the most per month because payments cease at the annuitant's death. A lifetime immediate annuity converts an investment into a stream of payments that last until the annuity owner dies. Some state statutes and court decisions also protect some or all of the payments from those annuities. \hspace{5pt}\text{Liability}&\text{Credit}&&\\ B)Variable annuities. D)A variable annuity, Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. "Variable Annuities: What You Should Know," Pages 67. If he wants to purchase an annuity and start receiving payments now, what would you suggest? B)I and II Required fields are marked *. D) Mutual Fund portfolio consisting of blue chip stocks. The beneficiary is taxed at ordinary income rates during the year the lump sum is received. Deferred annuities A deferred annuity is designed to collect premiums and accrue investment income over an extended period for payout at a later timefor example, when an individual retires. A) There is no risk in a variable annuity. C)number of accumulation units. The contract has a schedule of surrender charges, beginning with a 7% charge in the first year, and declining by 1% each year. Annuities | FINRA.org C)100% tax deferred. Reference: 12.1.4.1 in the License Exam. Variable annuity salespeople must register with all of the following EXCEPT: Your answer, the state banking commission., was correct!. withdraw funds without any tax consequences. The # of accumulation units is always fixed throughout the accumulation period, 2. In addition, you can withdraw 10% of your contract value each year free of surrender charges. The accumulation unit's value is used to calculate the total value of the account. Question #32 of 48Question ID: 606815 If the owner of a VA dies during the accumulation period, any death benefit will: B) be paid to the issuing company to complete the plan, C) be paid to the designated beneficiary, D) be paid to any legal heirs as recognized by the annuitant's state of domicile.

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