The separate account is used for both variable life insurance and variable annuity investments. A) Only during the payout period. Distributions to the annuitant will fluctuate during the payout period. Question #33 of 48Question ID: 606832 An annuity is an agreement for one person or organization to pay another a series of payments. Before the contract is annuitized, your client, currently age 60, withdraws some funds for personal purposes. This recommendation is: A)There is no tax as the withdrawal is considered return of capital. During the . On any device & OS. Question #29 of 48Question ID: 606831 C) II and IV. If the contract holder dies before the period expires, the remaining payments are made to the beneficiary. D)variable annuities offer the investor protection against capital loss. Variable annuities provide protection from inflation because their monthly income can increase depending on the separate account's performance. Instructions\textsf{\textcolor{#4257b2}{Instructions}}Instructions This guideline has been prepared for use by Federal agencies. In a variable annuity contract, the provision that guarantees the annuitant payments for life is called the: used for the investment of funds paid by contract holders. When may a variable annuity account be surrendered? B) a variable annuity contract is not required to be sold by prospectus because it is an insurance contract The anti-money laundering rules for insurance companies highlight that each insurance company - like other financial institutions subject to anti-money laundering program requirements - must develop a risk-based anti-money laundering program that identifies, assesses, and mitigates any risks of money laundering, terrorist financing, and other C)complete all paper work to purchase the annuity contract and obtain the clients signature immediately. do not have a separate account A customer has a nonqualified variable annuity. 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. D)accumulation units. A) I and IV. Reference: 12.3.3 in the License Exam, Question #34 of 48Question ID: 606834 A) It will be higher. The creation of an estate. Question #35 of 48Question ID: 606810 In March, the actual net return to the separate account was 8%. Withdrawals from a nonqualified variable annuity are made on a LIFO basis, so the taxable earnings are considered taken out before principal. D)A variable annuity, Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. The money paid in will be returned tax free, but the earnings portion will be taxed as ordinary income. C) with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed Question #40 of 48Question ID: 606800 Table1. The following changes have been incorporated into Special Publication 800145, as of the date indicated - . a variable annuity guarantees an earnings rate of return. B) II and IV. *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. I. 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. order now. If the customer takes a withdrawal of $10,000, what are the tax consequences? continues payments only as long as all annuitants are still alive. *The customer, in the accumulation stage of the annuity, is holding accumulation units. D)all return of cost basis and nontaxable, Annuitized payments from a variable annuity are viewed for tax purposes as part earnings and part cost basis. The AG49-A Revisions Consequently, the client pays taxes only on the growth portion of the withdrawal ($10,000). A) I and II. Reference: 12.3.1 in the License Exam, Question #30 of 48Question ID: 606833 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. D)I and IV. Final answer. A) The policy provides a minimum guaranteed death benefit. A)accumulation shares. C)It will be higher. B)I and II Question #47 of 48Question ID: 606813 The annuity unit's value represents a guaranteed return. *The minimum guaranteed death benefit is provided by that portion of the payment invested in the insurance company's general account. C)I and IV. b) What probability is the 20%20 \%20% mentioned above? D) expense guarantee. C)Variable annuity contract with a discussion regarding interest rate risk *Once a variable annuity is annuitized, the accumulation units are converted into a fixed number of annuity units. Reference: 12.1.1 in the License Exam. The tax on this is $2,800 ($10,000 x 28%). C) the yield is always higher than bond yields. \hspace{10pt} Medicare, 1.5%1.5\%1.5% In addition, if the customer is not at least 59-, there will be a tax penalty of an additional 10%. Distributions from nonqualified variable annuities are: D) 4500. All of the following are characteristics of Variable Annuity contracts EXCEPT The possibility of higher returns and greater income than fixed annuities, but there's also a risk that the account will fall in value A There are no surrender fees B Guaranteed death benefit C Tax deferred growth D Training Explanations Reference: 12.2.1 in the License Exam, Question #48 of 48Question ID: 606835 D) I and II. Variable annuities are designed to combat inflation risk. B) The death benefit cannot ever be more than the guaranteed benefit. The annuity unit's value represents a guaranteed return. C) suitable regardless of funding sources D) I and III. B)Life annuity with period certain. Listing tax-deferred growth as an objective for retirement income, which of the following investments is most suitable? D) accumulation shares. 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. There is no clear answer to this. 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. *Annuity death benefits are generally paid in a lump sum. The investor has already paid tax on the contributions but the earnings have grown tax-deferred. Question #22 of 48Question ID: 606803 B) Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. D)II and III. I. B)suitable regardless of funding sources A) I and III. When the second party dies, all payments cease. He earned the Chartered Financial Consultant designation for advanced financial planning, the Chartered Life Underwriter designation for advanced insurance specialization, the Accredited Financial Counselor for Financial Counseling and both the Retirement Income Certified Professional, and Certified Retirement Counselor designations for advance retirement planning. What Are the Biggest Disadvantages of Annuities? During payout, distributions will fluctuate due to performance in the separate account. C)the number of annuity units is fixed, and their value remains fixed. There is a guaranteed minimum interest rate, normally amounting to between 1 and 3 percent. C) early annuity phase-in Once a variable annuity has been annuitized: A joint life with last survivor annuity: B) I and II. Each of the remaining statements are true. Securely download your document with other editable templates, any time, with PDFfiller. For example, when paying rent, the rent payment (PMT) . Try Variable annuities were introduced in the 1950s as an alternative to fixed annuities, which offer a guaranteedbut often lowpayout during the annuitization phase. *A periodic payment immediate annuity is a contradiction in terms. *During the payout period, payments are based on a fixed number of annuity units established when the contract was annuitized. It is innate and universal. A) A variable annuity The value of the separate account is now $30,000. \hspace{10pt} \text{Warehouse salaries} & 110,000 & \hspace{10pt} \text{Social security tax withheld} & 51,714\\ The growth portion is taxed as a capital gain. the state banking commission. *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. The value of the separate account is now $30,000. Home; About. D)partially a tax-free return of capital and partially taxable. 10.1 This chapter addresses a number of ABS statistics relating to the economically active population which were not discussed elsewhere. The number of accumulation units can rise during the accumulation period. C) It will stay the same. B)a majority vote from the shareholders is required to change the investment objectives. C)insurance companies keep variable annuity funds in separate accounts from other insurance products. C)with guaranteed minimum withdrawal benefits (GMWBs) the periodic payments can be monthly, quarterly or annually A) II and IV. The most suitable option and one considered effective for married couples is a single joint and last survivor contract. D) II and III. B) I and III. In March, the actual net return to the separate account was 8%. You purchase a variable annuity contract by making either a single purchase payment or a series of purchase payments. 222. withdraw funds without any tax consequences. She may choose to receive monthly payments for the rest of her life. The payout of an annuitized variable annuity account changes from month to month in a manner determined by which of the following? Reference: 12.1.1 in the License Exam. Your customer is interested in a variable annuity but is unclear on some of the details regarding different specifications and riders that can be attached to the contract. Uses in Investing, Pros, and Cons, Indexed Annuity: Definition, How It Works, Yields, and Caps. Question #38 of 48Question ID: 606798 An accumulation unit in a variable annuity contract is: Your customer is interested in a variable annuity but is unclear on some of the details regarding different specifications and riders that can be attached to the contract. c) Construct a contingency table showing all the joint and marginal probabilities. Question #26 of 48Question ID: 606811 A deferred annuity is an insurance contract that promises to pay the buyer a regular stream of income, or a lump sum, at some date in the future. 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. How is the distribution taxed? c. The separate account provides for a guaranteed minimum return. The investor purchased accumulation units. Therefore only a fixed annuity could be considered as suitable. *Only variable annuities have payout plans that provide the client income for life. C)The entire $10,000 is taxable as ordinary income. How does an indexed annuity differ from a fixed annuity? D)suitable if she has enough equity in the home to fund the variable annuity without cashing out the other VA contract, Based on the information given in the question, the VA recommendation would not be suitable. The $30,000 contract value represents $10,000 of contributions and $20,000 of earnings. Question #36 of 48Question ID: 606805 Given that all of the current retirement investments are subject to market risk, the customer wants these new funds to have no market risk exposure. The number of annuity units is fixed at the time of annuitization. B)fixed in value until the holder retires. D) I and II. Investopedia does not include all offers available in the marketplace. A) waiver of premium Accumulation Period of Fixed Annuities During this period, premiums are credited with interest which accumulates on a yearly basis. A) III and IV. D)II and III. Herpes Zoster has all of the following characteristics except: Group of answer choices. The work environment characteristics are normal office conditions. A) Capital gains taxation on the earnings withdrawn in excess of the owner's basis. A) a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero The separate account is NOT likely to invest in: An annuity factor is taken from the annuity table, which considers, for example, the investor's sex and age. If your customer invests in a variable annuity and chooses to annuitize at age 65, which of the following statements are TRUE? Her agent recommended she choose a variable annuity as a safe haven for the funds. Annuities are complicated products, so that may be easier said than done. Therefore, ordinary income taxes will apply to the entire $10,000. An annuity is an insurance product that promises to pay out income at a future date based on invested funds. The earnings on dollars invested into a variable annuity accumulate tax deferred, which is why variable annuities are popular products for retirement accumulation. A) waiver of premium A variable annuity does not guarantee an earnings rate because earnings will depend on the performance of the separate account. The value of a variable annuity is based on the performance of an underlying portfolio of sub accounts selected by the annuity owner. A)I and IV. C)III and IV. A) 4000. C) 10 years of variable payments. B)Tax-free municipal bonds D) value of accumulation units. Question #24 of 48Question ID: 606806 C)not suitable because a lifetime income rider is only for someone who is already retired