The holder of a variable annuity receives the largest monthly payments under which of the following payout options? required to be located off of the company's premises. B)I and III. Your customer in his early 30s has received a modest inheritance from a relative. If your customer invests in a variable annuity and chooses to annuitize at age 65, which of the following statements are TRUE? Science Health Science Nursing. Reference: 12.1.2 in the License Exam, Question #21 of 48Question ID: 606812 A) A variable annuity Surrender fees and penalties for early withdrawal. A) I and II All of the following statements regarding variable annuities are true EXCEPT: In deciding whether to put money into a variable annuity versus some other type of investment, its worth weighing these pros and cons. 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 variable annuity's separate account is: A separate account will invest in a number of different securities. A) changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. The earnings on dollars invested into a variable annuity accumulate tax deferred, which is why variable annuities are popular products for retirement accumulation. Question #16 of 48Question ID: 606807 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. *The accumulation period of a variable annuity may continue for many years. Your 55-year-old client invested $50,000 four years ago in a nonqualified variable annuity. *A variable annuity payout is determined by comparing account performance with AIR, and this month's payout with last month's payout. The $30,000 contract value represents $10,000 of contributions and $20,000 of earnings. III. B) Life annuity. Before the contract is annuitized, your client, currently age 60, withdraws some funds for personal purposes. A) Ordinary income tax on earnings exceeding basis. An annuity factor is taken from the annuity table, which considers, for example, the investor's sex and age. *During the accumulation phase, the number of accumulation units will increase as additional money is invested. 8 annuities provide a guaranteed rate of return, whereas annuities provide conservative to aggressive investments whose rates of return are not guaranteed. If you die before the payout phase, your beneficiaries may receive a. 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) I and IV. A) Money market fund. Contributions to an IRA may be tax deductible, depending on the individual's earnings and participation in a company-sponsored qualified retirement plan. B) Life annuity with period certain B) 10% penalty plus payment of ordinary income tax on all funds withdrawn. D) each annuity unit's value varies with time, but the number of annuity units is fixed. C) Life annuity with period certain. 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. A)defined contribution plans. Life Insurance vs. Annuity: What's the Difference? C)The entire $10,000 is taxable as ordinary income. Can I Borrow from My Annuity for a House Down Payment? Accumulation Period of Fixed Annuities During this period, premiums are credited with interest which accumulates on a yearly basis. Question #32 of 48Question ID: 606815 A)Joint tenants annuity. The number of accumulation units is always fixed throughout the accumulation period. An important basic characteristic of common stocks that makes them a suitable type of investment for the separate account of variable annuities is: While variable annuities have greater potential for earnings, since their interest rate rises and falls with their underlying investments, they can lose money. Reference: 12.1.2.1.2 in the License Exam. They are more suitable for individuals who can fund the annuity with cash, want to supplement existing retirement benefits they have already funded, are comfortable with the market risk associated with a VA separate account portfolio and anticipate a long retirement. B) allow customers to opt out of sharing of financial information with certain nonaffiliated firms. A guaranteed death benefit guarantees that the beneficiary will receive a death benefit if the annuitant dies before the annuity begins paying benefits. C)It will be higher. A) Fixed Annuity B) The entire $10,000 is taxable as ordinary income. What type of annuity has a cash value that is based upon the performance of it's underlying investment funds? D) the yield is always higher than mortgage yields. II. Which of the following recommendations would best meet the customer profile? A)Fixed annuity contract with a discussion regarding purchasing power risk C) suitable regardless of funding sources A)contact the issuer of the clients existing VA contract to facilitate the clients surrender of the contract. It is innate and universal. Fixed Annuity, Retirement Annuities: Know the Pros and Cons. an annuitant dies sooner than expected. This factor is used to establish the dollar amount of the first annuity payment. IV. Variable annuities gave buyers a chance to benefit from rising markets by investing in a menu of mutual funds offered by the insurer. B) payment guarantee. All of the following statements about variable annuities are true EXCEPT: B) I and II. D) II and IV. C) III and IV. Expert Answer. Periodic payments are not a consideration because normally the payments into an annuity are level or in a lump sum. Reference: 12.2.1 in the License Exam. The value of an annuity unit varies from month to month according to the performance of the separate account in comparison to the assumed interest rate. Spartan Technology Services and Solutions Private Limited is a subsidiary of IBM (International Business Machines) Corporation. C)the yield is always higher than bond yields. What is the taxable consequence of this withdrawal to your client? Her agent recommended she choose a variable annuity as a safe haven for the funds. An annuity may be purchased under all of the following methods EXCEPT: \text{Salaries:} && \text{Deductions:}\\ Once a customer annuitizes a variable annuity, which of the following statements are TRUE? The LATF-adopted ILVA Actuarial Guideline has an effective date of July 1, 2024 for contracts, riders or endorsements issued on or after that date. The annuity unit's value represents a guaranteed return. Variable annuity Which of the following is characteristic of fixed annuities? D) None, because it is the proceeds from a life insurance company. When the second party dies, all payments cease. View full document. A) I and II Reference: 12.1.2.1.1 in the License Exam. 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. Periodic payment deferred annuity. Which of the following is not a characteristic of a program module? A 45-year-old employed individual with no other retirement accounts in place B) II and III C) value of underlying securities held in the separate account. *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. an annuitant lives longer than expected. \hspace{7pt} a. December 303030, to record the payroll. B) 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. B) the safety of the principal invested. This describes which of the following annuities? The minimum guaranteed death benefit is provided by that portion of the payment invested in the insurance company's general account. She will receive the annuity's entire value in a lump-sum payment. B)I and III. During the . A universal variable life policy should be purchased primarily for its insurance features, not its investment features. national origin, genetics, disability, age, veteran status, or any other characteristic protected by law. B)I and IV. 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. D) It cannot be determined until the April return is calculated. B)a minimum rate of return is guaranteed. C)Growth mutual funds A) I and II. In March, the actual net return to the separate account was 8%. D) a minimum of 10 years of variable payments, followed by additional variable payments for life 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. The $30,000 contract value represents $10,000 of contributions and $20,000 of earnings. A prospectus for a variable annuity contract: b. The annuitant may not contribute and withdraw simultaneously. U.S. Securities and Exchange Commission. A) number of annuity units. VAs, blue chip mutual fund portfolios, ETFs and ETNs are all tied to market performance in some way and have risk characteristics that would not align in terms of suitability for this client. D) I and IV. C)100% tax deferred. On any device & OS. In addition, an element of risk must be present. Instructions\textsf{\textcolor{#4257b2}{Instructions}}Instructions A 10% penalty applies only if distributions begin before age 59-. Variable annuity salespeople must register with all of the following EXCEPT: Which of the following are defined as securities? savingsbonds30,420Groupinsurance45,630$341,718\begin{array}{lrlr} A) A 75 year old women, who is a former executive retired for over ten years who wants to preserve as much capital as she can to leave to her two grandchildren. C) III and IV These include white papers, government data, original reporting, and interviews with industry experts. On an annual basis, the machine will produce 20,000 units with an expected selling price of $10, prime costs of$6 per unit, and a fixed cost allocation of $3 per unit. The number of annuity units becomes fixed when the contract is annuitized; it is the value of each unit that fluctuates. Which is it? Once the contract is annuitized, monthly payments to the customer are: D)It cannot be determined until the April return is calculated. order now. continues payments as long as one annuitant is alive. The figure below illustrates a six-month annuity with monthly payments. Reference: 12.1.4.2 in the License Exam. do not have a separate account Variable annuities must be registered with: A) I and IV. D)value of accumulation units. B) 0. C) Universal variable life policy. A) a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero IV. Which of the following statements regarding variable annuities are TRUE? *Once a variable annuity is annuitized, the accumulation units are converted into a fixed number of annuity units. The AG49-A Revisions *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. Securely download your document with other editable templates, any time, with PDFfiller. C) with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed A) an accounting measure used to determine payments to the owner of the variable annuity. The company's well-known Rock symbol is an icon of strength, stability, expertise and innovation that has stood the test of time. D) the payout plans provide the client income for life. D) an accounting measure used to determine the contract owner's interest in the separate account. With regard to a variable annuity, all of the following may vary EXCEPT: 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. *Insurance companies introduced the variable annuity as an opportunity to keep pace with inflation. Essential Characteristics: If you need to withdraw money from the account because of a financial emergency, you may face surrender fees. As with most retirement account options, withdrawals before the age of 59 will result in a 10% tax penalty. A security is any investment for profit with management performed by a third party. \hspace{10pt} Social security, 6%6\%6% on first $100,000\$100,000$100,000 of employee annual earnings 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) II 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. How to Rollover a Variable Annuity Into an IRA. Variable annuities are designed to combat inflation risk. Variable annuities involve underlying equity investments in a separate account. Future annuity payments will vary according to the separate account's performance. a variable annuity does not guarantee an earnings rate of return. B) During the accumulation period. C) number of accumulation units. a life insurance holder dies sooner than expected. A) changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. D)the rate of return is determined by the underlying portfolio's value. Variable annuities should be considered long-term investments due to the limitations on withdrawals. Question #44 of 48Question ID: 606797 Sample problems from Chapter 9 . Once the cost basis is reached, any further withdrawals are a nontaxable return of principal. *Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. 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 rises once annuitization begins. *When money is deposited into the annuity, it is purchasing accumulation units. b) What probability is the 20%20 \%20% mentioned above? guarantees payments for a certain period of time. *Funding a VA contract by cashing out either life insurance policies or existing VA contracts, especially those held for a short period of time is not suitable.