Of the answer choices given the best would be to reevaluate the recommendation based on the new information tendered by the client. Her intent was to use the funds for the down payment on a house after graduation. D)Joint and last survivor annuity. D)I and III. *Accumulation units represent units of ownership in a life insurance company's separate account when the contract is in the accumulation stage. A variable annuity is a type of annuity contract the value of which can vary based on the performance of an underlying portfolio of sub accounts. A)There is no tax as the withdrawal is considered return of capital. II. B) The proceeds minus John's cost basis taxed as ordinary income at Sue's tax rate. In addition, if the customer is not at least 59-, there will be a tax penalty of an additional 10%. Fixed income instruments, like bonds and fixed annuities, are subject to purchasing power risk. U.S. Securities and Exchange Commission. *The number of variable annuity accumulation units can rise during the accumulation period when additional units are being purchased. (Check all that apply.) D) the payout plans provide the client income for life. 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. Every annuity has some characteristics in common. If the contract holder dies before the period expires, the remaining payments are made to the beneficiary. C)100% tax deferred. do not have a separate account a. A) taxed at a reduced rate. Because common stocks are not fixed dollar investments, they have the opportunity to keep pace with inflation. C)I and IV. Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Claudia Bienias Gilbertson, Debra Gentene, Mark W Lehman, Eric W. Noreen, Peter C. Brewer, Ray H Garrison. D)A variable annuity, Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. Life income riders are best suited for those who anticipate a lengthy retirement and are generally not yet retired when making the VA purchase. The beneficiary is taxed at ordinary income rates during the year the lump sum is received. Reasonable accommodations may be made to enable individuals with disabilities to perform the essential functions. During payout, distributions will fluctuate due to performance in the separate account. B)Variable annuities. A)II and IV. vote for the investment adviser. A)each annuity unit's value and the number of annuity units vary with time. Most annuities will not allow you to withdraw additional funds from the account once the payout phase has begun. \hspace{7pt} a. December 303030, to record the payroll. The company's well-known Rock symbol is an icon of strength, stability, expertise and innovation that has stood the test of time. At the end of the year your account has a value of 10750. B)a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero A) mortality guarantee. Income that cannot be outlived by the owner 6102..55.001) is being updated on an ongoing basis. A)accumulation shares. They are also riddled with fees, which can cut into profits. C) There is no tax as the withdrawal is considered return of capital. The features of variable deferred annuities are many. order now. 111. Reference: 12.2.1 in the License Exam. B) value of annuity units. A 45-year-old investor takes a lump-sum distribution from a nonqualified variable annuity. Since , has paid out quarterly dividends ranging from $0.00 to $0.00 per share. C)not suitable because a lifetime income rider is only for someone who is already retired The $30,000 contract value represents $10,000 of contributions and $20,000 of earnings. C) Age 40, currently unemployed D) I and II. D) A 10% penalty plus the payment of ordinary income tax on funds withdrawn in excess of the owner's basis. D)suggest to the client that perhaps a loan or refinancing his vacation home might be a better way to fund the contract purchase. The creation of an estate. B)reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. C)Keogh plans. The growth portion is taxed as ordinary income. Question #44 of 48Question ID: 606797 Reference: 12.1.2 in the License Exam. IBM is a global brand and has its presence in 170 countries and operates . A) partially a tax-free return of capital and partially taxable. D) I and IV Typically, they allow one withdrawal each year during the accumulation phase. *The investor has already paid tax on the contributions but the earnings have grown tax-deferred. A) I and III. A) Life-only annuity What Are the Risks of Annuities in a Recession? && \hspace{10pt}\text{Group insurance} & \underline{45,630}\\ do not have a separate account For example, when paying rent, the rent payment (PMT) If your customer invests in a variable annuity and chooses to annuitize at age 65, which of the following statements are TRUE? A variable annuity is both an insurance and a securities product. B)variable annuities are classified as insurance products. The investor purchased accumulation units. The work environment characteristics are normal office conditions. Reference: 12.1.2 in the License Exam, Question #23 of 48Question ID: 901858 The value of the separate account is now $30,000. C)Life annuity. Reference: 12.1.4.1 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 payments are not a consideration because normally the payments into an annuity are level or in a lump sum. Bear in mind that between the numerous feessuch as investment management fees,mortality fees, and administrative feesand charges for any additional riders, a variable annuitysexpenses can quickly add up. A) I and IV. B)Tax-free municipal bonds This includes transportation, food, lodging, and entertainment. D)I and IV, Universal variable life policies are insurance company products that should be purchased primarily for the insurance features they offer rather than as an investment. A) A variable annuity C) 3800. Therefore, ordinary income taxes will apply to the entire $10,000. She may choose to receive monthly payments for the rest of her life. A)I and IV. All of the following are accurate statements to make to the client EXCEPT Her intent was to use the funds for the down payment on a house after graduation. B)FINRA. savingsbondsGroupinsurance$198,74451,71415,21030,42045,630$341,718, Tax rates assumed: D) each annuity unit's value varies with time, but the number of annuity units is fixed. When may a variable annuity account be surrendered? C) It will stay the same. C) Tax-free municipal bonds Question #35 of 48Question ID: 606810 B) I and III. D) III and IV. Facebook reports that 70%70 \%70% of their users are from outside the United States and that 50%50 \%50% of their users log on to Facebook daily. The following changes have been incorporated into Special Publication 800145, as of the date indicated - . B) I and II. B) I and IV. D)Variable annuity contract with a discussion regarding legislative risk, A VA with its investments in the separate account subject to market risk would not align with the customer's objective. 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 accumulation period of a variable annuity may continue for many years. 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. it performs a single task b. it is self-contained and independent of other modules c. it is relatively short d. all of the above are chamcleristics of a program module 7. If the owner of a variable annuity dies during the accumulation period, any death benefit will: A) Money market fund. A variable annuity is a type of annuity contract, the value of which can vary based on the performance of an underlying portfolio of sub accounts. If your customer invests in a variable annuity and chooses to annuitize at age 65, which of the following statements are TRUE? A) There is no risk in a variable annuity. This factor is used to establish the dollar amount of the first annuity payment. A)not suitable 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. C)Growth mutual funds (The exception is the fixed income annuity, which has a moderate to high payout that rises as the annuitant ages). D) I and II. He wants to ensure that the client, in addition to meeting suitability requirements, is aware of certain variable annuity contract characteristics. C) Corporate bonds. B) the number of annuity units is fixed, and their value remains fixed. *Only variable annuities have payout plans that provide the client income for life. D)the rate of return is determined by the underlying portfolio's value. A)variable annuities may only be sold by registered representatives. Needs - are goal-directed forces that people experience. The value of the annuity units is fixed. B) I and II. C) each annuity unit's value and the number of annuity units vary with time. I. An annuity is an insurance product that promises to pay out income at a future date based on invested funds. Underlying equity investments T, age 70, withdraws cash from a profit-sharing plan and purchases a Straight Life Annuity. (primary needs). You can tailor the income stream to suit your needs. a) What percentage of Facebook's users are from the United States? When the contract is annuitized, the annuitant is credited with a fixed number of annuity units. B) It will be lower. An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are. A)contact the issuer of the clients existing VA contract to facilitate the clients surrender of the contract. It was a lump-sum purchase. C) taxed as ordinary income only to the extent of earnings. A) mutual fund units. A variable annuity's separate account is: D)the state insurance department. Distributions from such an annuity are computed on a LIFO basis with the income taxed first. The client agrees to purchase the contract and informs the RR that he will be cashing out a VA he purchased 2 years ago to fund the new contract and will forward the check as soon as he receives it. D)I and III. A)the yield is always higher than mortgage yields. In addition, if the customer is not at least 59-, there will be a tax penalty of an additional 10%. The value of the customer's account is converted into annuity units if and when the customer decides to annuitize the contract. Before the contract is annuitized, your client, currently age 60, withdraws some funds for personal purposes. B) II and III C)II and III. Once the cost basis is reached, any further withdrawals are a nontaxable return of principal. Determine whether the following events are independent or dependent. C) Life annuity with period certain. 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 periodic payment immediate annuity is a contradiction in terms. A)2800. a variable annuity does not guarantee an earnings rate of return. For this potential advantage, the investor, rather than the insurance company, assumes the investment risk. C) Unit refund life option C)3800. A registered representative explaining variable annuities to a customer would be CORRECT in stating that: A) The fact that the annuity payment may increase or decrease. When a variable contract is annuitized (distributed in regular payments, not as a lump sum), the number of accumulation units is multiplied by the unit value to arrive at the account's current value. An immediate annuity is designed to pay an income one time-period after the immediate annuity is bought. must precede every sales presentation. Fixed annuities pay a fixed monthly benefit which loses purchasing power if there is inflation. The number of annuity units is fixed at the time of annuitization. Since the client is older than 59 at the time of distribution, the additional 10% penalty tax is not incurred. Variable annuities gave buyers a chance to benefit from rising markets by investing in a menu of mutual funds offered by the insurer. If the customer takes a withdrawal of $10,000, what are the tax consequences? The annuitized payments are viewed for tax purposes as Reference: 12.3.3 in the License Exam. 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. Question #26 of 48Question ID: 606811 When a partial withdrawal is made from an annuity, the earnings are considered to be taken out first for tax purposes (or LIFO). The most popular type of variable annuity is a deferred annuity. U.S. Securities and Exchange Commission. B)cost of living. A) not suitable The wage for applicants for this position is $45,979.00 per year. A) variable payments for 10 years, followed by fixed payments for life. B) Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. C)I and IV. D) I and II. D) reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. A customer has a nonqualified variable annuity. C. A 58-year-old individual near retirement who is in good health and anticipates a lengthy retirement B) The policyowner. Changes in payments on a variable annuity correspond most closely to fluctuations in the: P=525p2+65,326p185,000E=326p+185,000P=-525 p^{2}+65,326 p-185,000 \quad E=-326 p+185,000P=525p2+65,326p185,000E=326p+185,000. A) 4000. All of the following statements concerning a variable annuity are correct EXCEPT: A)II and IV. A) Fixed Annuity Accumulation Period of Fixed Annuities During this period, premiums are credited with interest which accumulates on a yearly basis. B)changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. The tax on this amount is $3,000. If an investor has purchased an immediate variable annuity, which of the following statements best describe the investment? C) be returned to the separate account. must provide full and fair disclosure. B) The death benefit cannot ever be more than the guaranteed benefit. vote on proposed changes in investment policy. Assuming that the payroll for the last week of the year is to be paid on January 444 of the following fiscal year, journalize the following entries: A) Only during the payout period. When the first party dies, the annuity payment is made to the survivor. C) II and IV a variable annuity does not guarantee an earnings rate of return. The second phase is triggered when the annuity owner asks the insurer to start the flow of income, often referred to as the payout phase. D)partially a tax-free return of capital and partially taxable. The number of annuity units is fixed at the time of annuitization. C) none of these. Reference: 12.1.4.2 in the License Exam. B) contact the issuer of the clients existing VA contract to facilitate the clients surrender of the contract. Ideally they should be funded with readily available cash rather than using funds liquidated from existing investments. Reference: 12.1.4 in the License Exam. II. For a nonqualified variable annuity, cost basis for the annuitant would use the after-tax dollars contributed. The number of annuity units is fixed. Reference: 12.3.3 in the License Exam. B)II and III. can be sold by someone with only an insurance license There is a guaranteed minimum interest rate, normally amounting to between 1 and 3 percent. B) I and III. D) periodic payment deferred annuity. C)complete all paper work to purchase the annuity contract and obtain the clients signature immediately. A) mortality guarantee. The growth portion is taxed as a capital gain. B)I and IV. *Insurance companies introduced the variable annuity as an opportunity to keep pace with inflation. 5 Q All of the following are characteristics of variable whole life EXCEPT the premium is level there is no guaranteed cash value there is no guaranteed minimum death benefit. Fixed interest rates during the payout period The value of each accumulation unit varies: Daily Variable annuities have Variable interest rates and benefits All of the following statements are true regarding the interest rate guarantees of fixed annuities, EXCEPT: A) variable annuities offer the investor protection against capital loss. An important basic characteristic of common stocks that makes them a suitable type of investment for the separate account of variable annuities is: When the contract is annuitized, the annuitant is credited with a fixed number of annuity units. The following are the characteristics or the hierarchy of a trend except A. Gigatrends C. Megatrends B. Macrotrends D. Nanotrends _____11. Assuming that the payroll for the last week of the year is to be paid on December 313131, journalize the following entries: The customer, in the accumulation stage of the annuity, is holding accumulation units. A) 2800. C)III and IV. A customer has a nonqualified variable annuity. *Payments from a variable annuity depend on the securities' value in the separate account's underlying investment portfolio. $63,000 b.$51,000 c. $18,000 d.$6,000. If you need to withdraw money from the account because of a financial emergency, you may face surrender fees. Once a variable annuity has been annuitized: A) number of annuity units. A)II and IV. C) During the annuity period. B) life income You have 4 clients each expressing interest in a variable annuity contract. **Because common stocks are not fixed dollar investments, they have the opportunity to keep pace with inflation. Immediate life annuity. B)Capital gains taxation on the earnings withdrawn in excess of the owner's basis. C) II and IV. A life with period certain contract guarantees payments for a specified number of years to a named beneficiary if the annuitant dies during that time. Diagnosis is made by punch biopsy. C)the invested money will be professionally managed according to the issuers' investment objectives. C)none of these. C)I and III. He originally invested $29,000 4 years ago; it now has a value of $39,000. I. 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. On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity). A registered representative explaining variable annuities to a customer would be CORRECT in stating that: B) During the accumulation period. D)value of accumulation units. Classifying annuities There are many categories of annuities. 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. The number of accumulation units is always fixed throughout the accumulation period. The $30,000 contract value represents $10,000 of contributions and $20,000 of earnings. D) I and III Word bank:Fixed, Variable Fixedannuities provide a guaranteed rate of return, whereas Variableannuities provide conservative to aggressive investments whose rates of return are not guaranteed. &&& \underline{\underline{\$341,718}} U.S. Securities and Exchange Commission. C)Corporate bonds. A) Dow Jones Industrial Average. If your client, who is in the 28% tax bracket, makes a lump-sum withdrawal of $15,000, what tax liability results from the withdrawal? The owner of a variable annuity has all of the following rights EXCEPT the right to vote: a. for the Board of Trustees b. to change the separate account's investment objective c. for distributing income and capital gains d. for dissolutions of the trust for distributing income and capital gains. None of the other investments listed here offer tax-deferred growth. Life with period certain will produce a smaller check for life because the insurance company will guarantee payments to a beneficiary for a certain period of time designated in the contract should the annuitant die within that period. Before buying a variable annuity, investors should carefully read the prospectus to try to understand the expenses, risks, and formulas for calculating investment gains or losses. The value of a variable annuity is based on the performance of an underlying portfolio of sub accounts selected by the annuity owner. She may choose to receive monthly payments for the rest of her life. Annuities: How to Find the Right One for You, How a Fixed Annuity Works After Retirement, Pros and Cons of Indexed Universal Life Insurance. For an insurance company, mortality risk turns out unfavorably if: A) I and III. D) I and III. Nicks Enterprises has purchased a new machine tool that will allow the company to improve the efficiency of its operations. The owner of a variable annuity has all of the following rights EXCEPT the right to vote: a. for the board of trustees b. to change the separate account's investment objective c. for distributing income and capital gains d. for dissolution of the trust c. for distributing income and capital gains. A) Age 56, available cash to invest, makes the maximum retirement plan contributions to an existing IRA and 401(k) plan
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