the following are all characteristics of variable annuities except:

Reference: 12.1.2 in the License Exam, Question #23 of 48Question ID: 901858 An annuity is an insurance product that promises to pay out income at a future date based on invested 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. B)part earnings and part cost basis B)I and IV. Immediate life annuity with 10-year period certain. c. The separate account provides for a guaranteed minimum return. Why Is It Important To Have Your Financial Plan And Goals In Place When Considering Investments? Fixed annuities are not considered securities as return is guaranteed by the insurance company issuer. You can buy an annuity with either a lump sum or a series of payments, and the accounts value will grow accordingly. Many investments are taxed year by year, but the investment earningscapital gains and investment incomein annuities arent taxable until the investor withdraws money. B)Fixed annuity contract with a discussion regarding timing risk A prospectus for a variable annuity contract: D)II and IV. The number of accumulation units can rise during the accumulation period. Variable annuity salespeople must register with all of the following EXCEPT: Variable annuity salespeople must be registered with FINRA and the state insurance department. For anyone who may need access to the sum invested at a later time, a VA would not be considered a suitable recommendation. D) The investment risk is shared between the insurance company and the policyowner. 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? Among annuities, variable annuities differ from fixed annuities, which provide a specific and guaranteed return. The # of accumulation units can rise during the accumulation period, 3. regulated under both securities and insurance laws. Before the contract is annuitized, your client, currently age 60, withdraws some funds for personal purposes. The owner of a life annuity with 10-year period certain will receive payments for life, subject to a minimum of 10 years. Future annuity payments will vary according to the separate account's performance. Reference: 12.3.3 in the License Exam. The nature of the securities invested in - bonds and growth stocks - makes it necessary that sales reps and their principals be licensed in securities as well as insurance. A)the yield is always higher than mortgage yields. D)Any tax due is deferred. For anyone who may need access to the sum invested at a later time, a VA would not be considered a suitable recommendation. D)separate account may consist of mutual funds. B)I and III. C) a VA contract does not guarantee any type of return. A)Fixed annuity contract with a discussion regarding purchasing power risk B) the state insurance department. We'll bring you back here when you are done. The separate account is NOT likely to invest in: If a 42-year-old customer has been depositing money in a variable annuity for 5 years, and he plans to stop investing but has no intention of withdrawing any funds for at least 20 years, he is holding: Reference: 12.3.3 in the License Exam. An accumulation unit in a variable annuity contract is: Your answer, an accounting measure used to determine the contract owner's interest in the separate account., was correct!. 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. A)IPO. He makes the following four statements, all of which are true EXCEPT Reference: 12.3.3 in the License Exam. C)complete all paper work to purchase the annuity contract and obtain the clients signature immediately. Future annuity payments will vary according to the separate account's performance. 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). Please sign in to share these flashcards. Weight the criteria. Find out how you can intelligently organize your Flashcards. C) suitable due to the death benefit features of a variable annuity. Oct. 2014, Subjects: Annuity Contracts,Purchasing Annuities,Receiving Distribution from Annuities,Variable Life. \text{Owner's equity:}&&&\\ Reference: 12.1.1 in the License Exam. Fixed annuities pay a fixed monthly benefit which loses purchasing power if there is inflation. C. variable annuities will protect an investor against capital loss. Variable annuities provide protection from inflation because their monthly income can increase depending on the separate account's performance. In other words, the money in a fixed annuity will grow and will not drop in value. When the contract is annuitized, the annuitant is credited with a fixed number of annuity units. Variable Annuity Advantages and Disadvantages, Guide to Annuities: What They Are, Types, and How They Work. If this client is in the payout phase, how would his April payment compare to his March payment? The following annuities are available in fixed or variable form: 1. are purchased primarily for their insurance features. D) Mutual Fund portfolio consisting of blue chip stocks. A life annuity is an insurance product that features a predetermined periodic payout amount until the death of the annuitant. C)none of these. The beneficiary is taxed at ordinary income rates during the year the lump sum is received. Reference: 12.2.1 in the License Exam. B)the investment portfolio is managed professionally. This factor is used to establish the dollar amount of the first annuity payment. But again, the need to designate beneficiaries is not an issue for this annuitant. A)defined contribution plans. B)I and III. All Rights Reserved. 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. "Variable Annuities: What You Should Know," Page 3. 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 security is an investment for profit with management performed by a third party. 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. The contract has a schedule of surrender charges, beginning with a 7% charge in the first year, and declining by 1% each year. A)variable annuities will protect an investor against capital loss. Reference: 12.2.1 in the License Exam. They are also riddled with fees, which can cut into profits. Question #41 of 48Question ID: 606801 & securities licenses. Reference: 12.1.2.1.1 in the License Exam. These contracts cover both lives and will continue to make payments until the last spouse dies. co. actuaries. For a nonqualified variable annuity, cost basis for the annuitant would use the after-tax dollars contributed. Your answer, The entire $10,000 is taxable as ordinary income., was correct!. You should now have gotten the answer to your question All of the following are characteristics of a variable annuity, except:, which was part of Insurance MCQs & Answers. A)equity funds. C)I and III. A)each annuity unit's value and the number of annuity units vary with time. \end{array} As the name implies, the investment performance of a variable annuity's portfolio (separate account) can vary, and the investor bears the risk of any potential decline in its value. The # of annuity units becomes fixed when the contract is annuitized; it is the value of each unit that fluctuates. Meanwhile, options like an annuity can provide a guaranteed income during, With a deferred annuity, you make a one-time payment to the insurance. withdraw funds without any tax consequences. 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. 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. An investor who purchases a fixed annuity contract assumes purchasing-power risk. There are many categories of annuities. The holder of a variable annuity receives the largest monthly payments under which of the following payout options? Based on this information the RR should: Therefore, variable annuities must be registered with the state insurance commission and the SEC. Variable annuities must be registered with: A variable annuity is a combination of 2 products: an insurance contract and a mutual fund. Premiums made into the annuity purchase accumulation units, c. The separate account provides for a guaranteed minimum return, d. Each month the payment will increase, decrease, or remain the same as the previous months payment based on the actual return as compared to the assumed interest rate (AIR). Balancesheetaccounts:AssetLiabilityOwnersequity:CapitalDrawingIncomestatementsaccounts:RevenueExpenseIncreaseCreditCreditCreditDecreaseCredit(j)CreditNormalBalanceDebit. How to Rollover a Variable Annuity Into an IRA. SIE Practice Exam #2 (score 93%) Flashcards | Quizlet vote on proposed changes in investment policy. In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. The fund is kept within an IHT protected pension trust and can be passed down using a spousal bypass trust (SBT) can be used with personal pension plans to p Any purchase of securities will contain an element of risk. D)the rate of return is determined by the underlying portfolio's value. Your 65-year-old client owns a nonqualified variable annuity. 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. Your answer, The policyowner., was correct!. Similarly, CDs are insured, thereby eliminating risk and guaranteeing a return. C)annuity units. Reference: 12.1.2 in the License Exam. All of the following investment strategies offer either fully or partially tax-deductible contributions to individuals who meet eligibility requirements EXCEPT: Your answer, variable annuities., was correct!. Sub accounts and mutual funds are conceptually identical, but sub accounts don't have ticker symbols that investors can easily type into a fund tracker for research purposes. A fixed annuity is an insurance contract that pays a guaranteed rate of interest on the owner's contributions and later provides a guaranteed income. This customer has no spouse or dependents, which negates the value of the death benefit. Because common stocks are not fixed dollar investments, they have the opportunity to keep pace with inflation. Question #43 of 48Question ID: 606809 Explaining What have been the major population changes since the first census in 1790? However, a discussion should occur regarding the risks that are associated with a fixed annuity; purchasing power risk. The holder of a variable annuity receives the largest monthly payments under which of the following payout options? The most suitable option and one considered effective for married couples is a single joint and last survivor contract. The separate account performance compared to last month's performance. Payments from a variable annuity depend on the securities' value in the separate account's underlying investment portfolio. The following annuities are available in fixed or variable form: 1. regulated under both securities and insurance laws. Your answer, Variable annuity., was correct!. a variable annuity guarantees an earnings rate of return. Nonqualified annuities A nonqualified annuity is one purchased separately from, or outside of, a taxfavored retirement plan. The investor has already paid tax on the contributions but the earnings have grown tax-deferred. If an investor has a fixed-annuity contract with an insurance company, which of the following risks is assumed by the investor? D)Dow Jones Industrial Average. All of the following are characteristics of variable whole life EXCEPT. B)Variable annuities. B)cost of living. These include white papers, government data, original reporting, and interviews with industry experts. 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. withdraw funds without any tax consequences. a variable annuity does not guarantee payments for life. Cram has partnered with the National Tutoring Association. used to escrow late or otherwise delinquent premium payments. The earnings on dollars invested into a variable annuity accumulate tax deferred, which is why variable annuities are popular products for retirement accumulation. Ideally they should be funded with readily available cash rather than using funds liquidated from existing investments. D) The ordinary income on the proceeds over the cost basis plus 10% of the net gain (if any) if Sue is younger than 59- years old. With a fixed annuity, by contrast, the insurance company assumes the risk of delivering whatever return it has promised. All of the following are characteristics of a variable annuity, except. Annuity death benefits are generally paid in a lump sum. An accumulation unit in a variable annuity contract is: Variable Annuity: Definition and How It Works, Vs. Fixed Annuity As part of his profile, he stresses that he has had uncomfortable experiences in the past with the stock market and is not inclined to invest in anything that is based on stock market performance and would opt for principal protection instead. As the name implies, the investment performance of a variable annuity's portfolio (separate account) can vary, and the investor bears the risk of any potential decline in its value. In the case of deferred annuities, this is often referred to as the accumulation phase. C)earnings only and taxable An annuity is an agreement for one person or organization to pay another a series of payments. Find out how you can intelligently organize your Flashcards. What is the taxable consequence of this withdrawal to your client? A)I and IV. A customer is receiving annuitized payments from a variable annuity. Reference: 12.2.1 in the License Exam, Question #48 of 48Question ID: 606835 Fixed income instruments, like bonds and fixed annuities, are subject to purchasing power risk. D)A 10% penalty plus the payment of ordinary income tax on funds withdrawn in excess of the owner's basis. Question #40 of 48Question ID: 606800 A variable annuity is both an insurance and a securities product. Variable annuities must be registered with: A prospectus for a variable annuity contract: When may a variable annuity account be surrendered? Your answer, Variable annuities., was correct!. the state banking commission. Generally the most that creditors can access is the payments as they are made, since the money the annuity owner gave the insurance company now belongs to the company. Question #44 of 48Question ID: 606797 Must precede every sales presentation. Reference: 12.3.2.1 in the License Exam. If an ins. This customer has no spouse or dependents, which negates the value of the death benefit. A)100% tax free. A separate account will invest in a number of different securities. Question #42 of 48Question ID: 606830 Mortality assumptions are based on life expectancy or mortality tables prepared by ins. a variable annuity guarantees payments for life.

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