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a life insurance holder lives longer than expected. D)A variable annuity, Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. They are also riddled with fees, which can cut into profits. The pooling is unique to annuities, and its what enables annuity companies to be able to guarantee a lifetime income. There is a common apprehension that if an individual starts an immediate lifetime annuity and dies soon after that, the insurance company keeps all of the investment in the annuity. 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? 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!. Once a variable annuity has been annuitized: Contributions to a nonqualified variable annuity are not tax deductible. by jmacewe, Question #40 of 48Question ID: 606800 Life annuity has the largest payout because less risk is assumed by the insurance company; there is no beneficiary in the event the annuitant dies. B)a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero A rider or statement of condition that allows a variable life insured to maintain policy coverage after becoming disabled is a benefit known as. C)such an annuity is designed to combat inflation risk. Reference: 12.2.1 in the License Exam. Your answer, waiver of premium, was correct!. Nature of the underlying investment fixed or variable, Primary purpose accumulation or pay-out (deferred or immediate), Nature of payout commitment fixed period, fixed amount or lifetime, Premium payment arrangement single premium or flexible premium. In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. Annuities basics | III Reference: 12.3.2.4 in the License Exam. The entire amount is taxed as ordinary income. As with all tax-deferred accounts, muni bonds are not appropriate investments because interest earned on munis is already tax exempt at the federal level. An important basic characteristic of common stocks that makes them a suitable type of investment for the separate account of variable annuities is: We also reference original research from other reputable publishers where appropriate. B)Value of each annuity unit each month. Any withdrawals you make prior to the age of 59 may also be subject to a 10% tax penalty. If the customer takes a withdrawal of $10,000, what are the tax consequences? A customer has a nonqualified variable annuity. A)an accounting measure used to determine the contract owner's interest in the separate account. The amount that is paid doesnt depend on the age (or continued life) of the person who buys the annuity; the payments depend instead on the amount paid into the annuity, the length of the payout period, and (if its a fixed annuity) an interest rate that the insurance company believes it can support for the length of the payout period. Reference: 12.3.3 in the License Exam. Each of the remaining statements are true. Oct. 2014, Subjects: Annuity Contracts,Purchasing Annuities,Receiving Distribution from Annuities,Variable Life. Based on this information the RR should: Fixed annuities are not considered securities as return is guaranteed by the insurance company issuer. Question #13 of 48Question ID: 606822 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.