Retirement Accounts

A small business owner of a firm that has 25 employees wants to establish a retirement plan and make contributions for her employees. What type of plan can the employer establish? A. Traditional IRA B. Roth IRA C. SEP IRA D. 403(b)

C. Sep IRA

The penalty tax applied for not taking required minimum distribution from a qualified retirement plan in a given year is

50% of the shortfall

To avoid penalties, funds cannot be withdrawn from tax qualified retirement plans before age:

59 1/2

A divorced woman with 2 young children has a small trust fund that gives her $2,500 a year in income. She collects another $2,500 per year in alimony payments. The woman wishes to make a contribution to an Individual Retirement Account this year. Which statement is TRUE? A. No contribution can be made based on either the alimony payments or the trust fund income B. A contribution can be made based only on the income received from the trust fund C. A contribution can be made based only on the alimony payments received D. A contribution can be made based on both the income received from the trust fund and the alimony payments received

A

A new customer, age 45, has been terminated from his assembly-line job of the past 20 years at an automotive parts supplier. During that time period, he has accumulated $124,000 in the company's 401(k) plan. He wishes to rollover the funds to an IRA account with your brokerage firm. This customer, who is an unsophisticated investor, has the entire 401(k) invested in a growth mutual fund and has no other investments. As the representative for this customer, your IMMEDIATE concern should be: A. communicating effectively with an unsophisticated customer in an understandable manner to assess financial goals and risk tolerance B. setting the investment allocation strategy that should be employed in order to provide sufficient retirement income for this individual C. creating a financial plan that emphasizes asset preservation and that is likely to provide a prolonged income stream for a prolonged period of retirement D. minimizing the tax consequences of any recommended transactions to increase the long-term growth potential of investments made

A

Generally, in order to defer taxation on an IRA that is inherited from a deceased spouse for the longest time period, a much younger surviving spouse can: A. roll over the IRA proceeds into an existing IRA owned for the benefit of the surviving spouse B. elect to receive the entire IRA proceeds as an immediate lump sum C. transfer the funds into an inherited IRA account D. elect to receive the entire proceeds over the next 5 years under the "5-year rule"

A

In 2020, the maximum contribution that an individual who earns $1,000 can make to an IRA is: A. $1,000 B. $4,000 C. $5,000 D. $6,000

A. $1,000

In 2020, a self-employed person earning $100,000, who also has $100,000 of investment income, wishes to open a Keogh Plan. Their maximum permitted contribution is: A. $20,000 B. $40,000 C. $57,000 D. $67,000

A. $20,000 Keogh contributions are based on personal service income. 20% or maximum contribution $57,000

A 60-year old man wishes to receive an annuity payment for himself and his beneficiary for at least 15 years. The recommended payout option is: A. life annuity B. life annuity--period certain C. life annuity--unit refund D. installments for a designated amount

B. life annuity--period certain

Variable annuities are: A. exempt securities that are sold without a prospectus B. non-exempt securities that must be sold with a prospectus C. insurance products that are sold without a prospectus D. futures products that are sold without a prospectus

B. non-exempt securities that must be sold with a prospectus

A customer buys a variable annuity and elects a payout option of Life Income with a 20 year period certain. This means that payments will continue for: A. the annuitant's life, not to exceed 20 years B. the annuitant's life, but if he dies before 20 years elapse, payments continue to his heir(s) C. the life of the annuitant and then cease D. 20 years to the annuitant or beneficiary

B. the annuitant's life, but if he dies before 20 years elapse, payments continue to his heir(s)

All of the following statements are true about SEP IRAs EXCEPT: A. the plan is established by the employer B. the plan is only available to companies with 100 or fewer employees C. the annual contribution percentage can be changed D. the maximum annual contribution is significantly greater than for a Traditional or Roth IRA

B. the play is only available to companies with 100 or fewer employees

An individual who maintains a Keogh Plan is approaching the age of 72. Which statement is TRUE? A. Distributions from the plan must commence on the date that the individual reaches the age of 72 B. Distributions from the plan must commence on April 1st prior to the year the individual reaches the age of 72 C. Distributions from the plan must commence on April 1st following the year the individual reaches the age of 72 D. Distributions are not required, but may be taken at the discretion of the individual

C

Which statement is TRUE when comparing a Roth IRA to a Traditional IRA? A. Anyone with earned income can open a Roth IRA or a Traditional IRA B. Traditional IRAs are not available to high-earning individuals; Roth IRAs are available to high-earning individuals C. Roth IRAs are not available to high-earning individuals; Traditional IRAs are available to high-earning individuals D. Only individuals with income below federal threshold levels can open either a Roth IRA or a Traditional IRA

C

Which statement is TRUE regarding a 28-year old woman who inherits her grandfather's IRA? A. She may delay distributions until she reaches age 59 1/2 B. She may roll over the amount inherited into her own IRA C. She must take distributions that deplete the account over the next 10 years D. She must start taking distributions upon reaching age 59 1/2

C. She must take distributions that deplete the account over the next 10 years

A client who owns a Traditional IRA and who is age 72 or older: A. must take RMDs in cash with the amount distributed taxable at capital gains rates B. must take RMDs in cash with the amount distributed taxable at ordinary income tax rates C. can take RMDs in securities from the account, with their cost basis being "0" and the sales proceeds being the market value at the distribution date, with the resulting gain taxable at capital gains rates D. can take RMDs in securities from the account, with their cost basis being "0" and the sales proceeds being the market value at the distribution date, with the resulting gain taxable at ordinary income tax rates

D

Which statement is TRUE about transfers of Individual Retirement Accounts? A. A maximum of 1 transfer is permitted each year B. A maximum of 2 transfers are permitted each year C. A maximum of 3 transfers are permitted each year D. There is no limit on transfers

D. There is no limit on transfers

For a qualified retirement plan contribution to be deductible from that year's tax return, the contribution must be made by no later than: A. April 15th of that year B. December 31st of that year C. April 15th of following year D. the tax filing date of the following year

D. the tax filing date of the following year

Which of the following statements are TRUE regarding contributions to, and distributions from, tax qualified retirement plans? I Contributions are made with before tax dollars II Contributions are made with after tax dollars III Distributions are 100% taxable IV Distributions are partially tax free, with the amount above the original cost basis being taxable

I and III

Which statements are TRUE regarding a Roth IRA? I Roth IRAs allow for tax-free growth II Roth IRA contributions are tax deductible III Roth IRAs are not subject to Required Minimum Distributions (RMDs) IV Roth IRAs are not subject to income limitations

I and III

To sell variable annuities, salespersons must be registered with (the): I FINRA II State Insurance Commission III State Banking Commission

I and II

Variable annuity contracts contain which of the following guarantees? I Mortality Guarantee II Expense Guarantee III Interest Rate Guarantee

I and II

Which statements are TRUE regarding Individual Retirement Accounts? I Investment in U.S. minted gold coins is permitted II Investment in U.S. issued securities is permitted III Investment in art is permitted IV Investment in collectibles is permitted

I and II

Text:If a person under the age of 59 1/2 wishes to withdraw money from her IRA, which statements are TRUE? I The withdrawal is subject to income tax II The withdrawal is not subject to income tax III The withdrawal is subject to a 10% penalty tax IV The withdrawal is not subject to a 10% penalty tax

I and III

Distributions prior to age 59 1/2 from qualified retirement plans that are not rolled over into an IRA or other qualified plan are subject to: I 10% penalty tax II 20% penalty tax III 10% withholding tax IV 20% withholding tax

I and IV

For an investor who has a Keogh Plan, which of the following statements are TRUE? I The plan is a tax qualified II The plan is non-tax qualified III Once distributions commence at age 59 1/2 or later, only the tax deferred build-up is taxed IV Once distributions commence at age 59 1/2 or later, both the original investment and the build-up are taxed

I and IV

When comparing fixed annuities to variable annuities, which statements are TRUE? I A fixed annuity account grows at a guaranteed rate II A variable annuity account grows at a guaranteed rate III Fixed annuities are subject to investment risk IV Variable annuities are subject to investment risk

I and IV

In order to recommend a variable annuity to a customer, the representative should have a reasonable basis to believe that the customer would benefit from: I tax-deferred growth of the separate account II the assurance of receiving income for life III any living or death benefit provided by the contract

I, II, III

Which of the following statements are TRUE regarding defined benefit plans? I Actuarial tables are used to determine contribution rates for each employee II Distributions upon retirement are 100% taxable III Employees with the highest salaries and the fewest years to retirement benefit the most IV Contributions made to the plan can vary from year to year

I, II, III, IV

Which of the following are purchase and payout options for variable annuity contracts? I Lump sum payment; Immediate annuity II Lump sum payment; Deferred annuity III Periodic payments; Immediate annuity IV Periodic payments; Deferred annuity

I, II, IV

Which of the following statements are TRUE about variable annuities? I Investment risk is carried by the purchaser of the annuity II Salespeople must register with both FINRA and the State Insurance Commission III Annuity payments may be reduced because of increased expenses experienced by the insurance company IV Variable annuities are considered to be securities regulated by the Investment Company Act of 1940

I, II, IV

Which of the following statements are TRUE for both mutual funds and variable annuities? I Asset appreciation is untaxed for both II Dividend and capital gains distributions are taxable each year for both III Both have portfolios that are managed IV Both are regulated by the Investment Company Act of 1940

I, III, IV

Variable annuity contracts: I have the issuer bear the investment risk II have the purchaser bear the investment risk III are non-exempt securities IV are exempt securities

II and III

Which of the following statements are TRUE about non-contributory defined benefit retirement plans? I Contribution amounts are fixed II Contribution amounts vary III Annual benefit payments are fixed IV Annual benefit payments vary

II and III

Which of the following statements are TRUE when describing a variable annuity separate account? I The separate account is part of the insurance company's general account holdings II The separate account is legally segregated from the insurance company's general account holdings III The separate account invests in shares of a designated mutual fund IV The separate account makes direct investments in shares of stock

II and III

Which statements are TRUE about variable annuities? I Contributions are tax deductible II Contributions are not tax deductible III Distributions are taxable IV Distributions are not taxable

II and III

The owner of a variable annuity has which of the following rights? I Right to vote for distributions of income and capital gains II Right to vote to change the separate account's investment objective III Right to vote for the Board of Trustees IV Right to vote for dissolution of the trust

II, III, IV

Which of the following individuals earning $100,000 of income per year can make a deductible contribution to an IRA? I Corporate employee covered by a pension plan II Corporate employee who is not covered by a pension plan III Self-employed individual who has established a Keogh plan IV Self-employed individual who has not established a Keogh plan

II and IV

Which of the following statements are TRUE about variable annuities? I Investment risk is carried by the issuer of the annuity II Salespeople must register with both FINRA and the State Insurance Commission III Annuity payments may be reduced because of increased expenses experienced by the insurance company IV Variable annuities are considered to be securities regulated by the Investment Company Act of 1940

II and IV

Which of the following statements are TRUE for both mutual funds and variable annuities that are in the accumulation phase? I Distributions are taxable to the holder in the year the distribution is made II The underlying portfolios are managed III The Investment Company Act of 1940 is the regulating legislation IV The return to investors is dependent on the performance of the securities in the underlying portfolio

II, III, IV

Which of the following are characteristics of Defined Benefit Plans? I Annual contribution amounts are fixed II If the corporation has an unprofitable year, the contribution may be omitted III The annual benefit amount is fixed at retirement IV The adoption of this type of plan benefits key employees who are nearing retirement

III and IV

Which retirement plans DO NOT have a RMD once the participant reaches 72?

Roth IRA

Aggregate contribution in 529 plans are

only subject to dollar limits at the state level

Section 529 plans are established by

the state

If the actual interest rate earned in the separate account underlying a variable annuity contract is higher than the "AIR" the annuity payment: A. will increase B. will decrease C. is unaffected D. is capped to a maximum amount

A. will increase

All of the following terms are associated with a variable life insurance policy EXCEPT: A. separate account B. accumulation unit C. death benefit D. annuitization

D. annuitization

Distributions from Section 401(k) plans are:

100% taxable

All of the following statements are true about variable annuities EXCEPT variable annuities: A. must be registered with the Securities and Exchange Commission B. must be sold with a prospectus C. are a participating unit investment trust form of investment company D. are sold without a sales charge

D. are sold without a sales charge

A 40 year old man wishes to remove monies from his IRA to fund his child's summer vacation. The customer has: A. no tax liability B. regular income tax liability only on the amount withdrawn C. 10% penalty tax only on the amount withdrawn D. both regular income tax liability and 10% penalty tax on the amount withdrawn

D. both regular income tax liability and 10% penalty tax on the amount withdrawn

Distributions from Roth IRAs: A. must commence by April 1st of the year prior to reaching the age of 72 without being penalized B. must commence by April 1st of the year of reaching age 72 without being penalized C. must commence by April 1st of the year after reaching age 72 without being penalized D. can commence at any time after reaching age 59 1/2 without being penalized

D. can commence at any time after reaching age 59 1/2 without being penalized

Which statements are TRUE regarding the annuitization of a variable annuity contract? I A Life Annuity payout option must be elected by the policy holder II Life Annuity-Period Certain may be elected by the policy holder III The number of annuity units will vary IV The annuity payment will vary

II and IV

All of the following statements are true regarding the annuitization of a variable annuity contract EXCEPT: A. variable annuity contracts require the holder to select a Life Annuity - Period Certain payout option B. the variable annuity payout may vary depending on the performance of the underlying securities C. the number of variable annuity units is fixed D. the holder may not change the payout option after it is elected

A. variable annuity contracts require the holder to select a Life annuity-Period certain payout options

What is the penalty imposed for excess contributions to an IRA? A. 6% of the excess contribution B. 8 1/2% of the excess contribution C. 10% of the excess contribution D. no penalties are imposed

A. 6% of excess contribution

Individual Retirement Account contributions can be made with: A. Cash B. Exempt Securities C. Non-Exempt Securities D. All of the above

A. Cash

403(b) Plans are permitted to invest in all of the following EXCEPT: A. Common stocks B. Mutual Funds C. Fixed Annuities D. Variable Annuities

A. Common Stock

During the accumulation phase of a variable annuity: A. payments can be made into the plan; but distributions may not be taken from the plan B. distributions may be taken from the plan; but payments may not be made into the plan C. both payments may be made into the plan; and distributions may be taken from the plan D. neither payments may be made into the plan; nor distributions may be taken from the plan

A. Payments can be made into the plan; but distributions may not be taken from the plan

If an individual, aged 69, takes a withdrawal from his Keogh Plan, which statement is TRUE? A. The amount withdrawn is subject to regular income tax only B. The amount withdrawn is subject to a 10% penalty tax only C. The amount withdrawn is subject to regular income tax plus a 10% penalty tax D. The amount withdrawn is not subject to any tax

A. The amount withdrawn is subject to regular income tax only

Which of the following is available to purchasers of variable annuity contracts? A. The guarantee of a minimum growth rate in the separate account if a higher annual fee is paid for this rider B. The guarantee of payments for life if the purchaser chooses to take a lump sum distribution at retirement C. Tax deductibility of contributions made to the contract if distributions are not taken until age 59 1/2 or later D. Payments covering the lives of both a husband and wife if a Life Annuity option is chosen upon annuitization

A. The guarantee of a minimum growth rate in the the separate account if a higher annual fee is paid for this rider

Under ERISA provisions, a pension fund manager that wishes to write naked call options: A. can only do so if explicitly allowed in the plan document B. can do so if the plan document allows for options transactions C. can do so without restriction D. is prohibited under ERISA requirements

A. can only do so if explicitly allowed in the plan document

A customer, age 60, is looking for an investment that will provide life-long income at retirement. The BEST recommendation would be for the customer to: A. purchase a variable annuity and annuitize the separate account at retirement B. purchase a variable annuity and take installments of a designated amount at retirement C. invest in an income mutual fund and elect not to automatically reinvest distributions D. invest in a GNMA fund since GNMAs make monthly payments

A. purchase a variable annuity and annuitize the separate at retirement

Investment risk in a variable annuity contract is carried by the: A. purchaser B. issuer C. custodian D. manager

A. purchaser

Your customer, age 68, who has an IRA account at your firm valued at $500,000, passes away. The customer leaves the account to his wife, age 62, who does not work. She needs current income and wishes to receive payments over the longest time frame possible. You should advise the spouse to: A. roll the funds over into a new IRA in the spouse's name B. transfer the IRA funds to a beneficiary distribution account C. cash out the inherited IRA account D. disclaim or give away the inherited IRA account

A. roll the funds over into a new IRA in the spouse's name

If a corporation has an unfunded pension liability, this means that: A. the expected future value of fund assets is less than projected benefit claims B. the expected future value of fund assets is more than projected benefit claims C. inflation has eroded the value of the portfolio funding the plan D. existing retirees' benefit claims are not being met

A. the expected future value of fund assets is less than projected benefit claims

An individual works in a small manufacturing business with fewer than 100 employees. The company does not offer a retirement plan. This individual has $5,000 of discretionary funds that she wishes to put away for retirement. The BEST recommendation for this individual is to make a $5,000 contribution to a(n): A. Traditional IRA B. 401(k) C. SEP IRA D. SIMPLE IRA

A. traditional IRA

A customer who is age 75 has been taking RMDs (Required Minimum Distributions) each year from his Traditional IRA in cash. This year, he asks his representative if he can take the distribution in the form of shares of a mutual fund position in his account. He tells the representative that because it has been a bear market, the share price is depressed and rather than liquidate, he would like to take the shares into his cash account at the firm, awaiting a market rebound. You should tell him that the RMD can: A. only be taken in cash B. be taken in securities, but the entire amount of the RMD will be taxable without receiving any cash to pay the tax bill C. be taken in securities with no tax due and the cost basis of the securities in the cash account will be "0" D. be taken in securities with no tax due and the cost basis of the securities in the cash account will be the market value as of the transfer date

B

Under the provisions of ERISA (Employee Retirement Income Security Act), the use of index options is: A. prohibited because of the speculative nature of these instruments B. allowed only if the strategies followed are in compliance with the objectives and restrictions of the plan C. allowed only if the plan trustee maintains physical possession of the underlying securities Dallowed without restriction as long as the investment manager acts in a prudent manner

B

A customer, age 50, invests $50,000 in a variable annuity. The account has grown in value to $60,000 and at age 55, the customer takes a lump sum withdrawal of $15,000. Which statement is TRUE about the taxation of the withdrawal? A. The entire $15,000 withdrawal is subject to regular income tax plus a 10% penalty tax B. $10,000 of the withdrawal is subject to regular income tax plus a 10% penalty tax; $5,000 of the withdrawal is not taxable C. $10,000 of the withdrawal is subject to regular income tax only; $5,000 of the withdrawal is not taxable D. The entire $15,000 withdrawal is not taxable

B. $10,000 of the withdrawal is subject to regular income tax plus a 10% penalty tax; $5,000 of the withdrawal is not taxable

A 65-year old individual has just retired after working for the same employer for 20 years. He will collect an annual pension benefit of $50,000, but is not yet ready to stop working. He has lined up a part-time job that will pay $3,000 this coming year. How much can he contribute to a Traditional Individual Retirement Account for his first year in retirement? A. 0 B. $3,000 C. $6,000 D. $7,000

B. $3,000

In 2020, a doctor has earned $300,000 from her practice and another $200,000 from investments. Their maximum contribution to an HR 10 plan is: A. $47,000 B. $57,000 C. $67,000 D. $114,000

B. $57,000

Catch-up IRA contributions are permitted for individuals who are at least age: A. 40 B. 50 C. 60 D. 70

B. 50

A person can start withdrawing from his or her Individual Retirement Account without penalty at age: A. 50 1/2 B. 59 1/2 C. 65 D. 72

B. 59 1/2

A smaller company with 75 employees wishes to establish a retirement plan. Some of the employees are highly paid, but most are part-time low wage earners. The company would like to maximize contributions for the highly-paid employees to keep these talented individuals. The company has erratic cash flow but is profitable overall. What type of retirement plan would be the best for the company? A. 401k Plan B. Profit Sharing Plan C. Keogh Plan D. 457 Plan

B. Profit Sharing plan

An individual owns a bicycle repair business as a sole proprietorship. He does not make a lot of money, but he does have $5,000 available for investment this year. The BEST recommendation for this individual is to make a $5,000 contribution to a(n): A. Traditional IRA B. Roth IRA C. SEP IRA D. SIMPLE IRA

B. Roth IRA

Which statement is TRUE about 401(k) Plans? A. They are established by the corporate employee B. The cost basis in the plan is "0" C. The maximum contribution amount is lower than that permitted for a SIMPLE IRA D. Distributions at retirement age are tax-free

B. The cost basis in the plan is 0

Any changes in value of a variable annuity unit are directly related to changes in the: A. Standard and Poor's 500 Average B. Value of the securities funding the separate account C. Consumer Price Index D. Dow Jones Averages

B. Value of the securities funding the separate account

An "accumulation unit" of a variable annuity contract is a(n): A. share of common stock representing an interest in the underlying portfolio B. accounting measure of the owner's interest in the separate account C. accounting measure of the annuity amount to be received by the owner D. share of beneficial interest in a fixed portfolio

B. accounting measure of the owner's interest in the separate account

Distributions from an Individual Retirement Account must commence: A. by April 1st of the year preceding that person reaching age 72 B. by April 1st of the year following that person reaching age 72 C. upon reaching age 70 1/2 D. upon reaching retirement

B. by April 1st of the year following that person reaching age 72

A mother, aged 60, wishes to withdraw monies from her variable annuity to pay for her son's college education. Which statement is TRUE regarding the taxation of the withdrawal? A. The withdrawal is 100% taxable and is also subject to a 10% penalty tax B. The withdrawal is 100% taxable C. The withdrawal is partially taxable; and a partial tax free return of invested capital D. The withdrawal is not subject to tax

C. The withdrawal is partially taxable; and a partial tax free return of invested capital

In 2020, an individual earning $60,000 makes a contribution of $2,000 to a Traditional IRA. Which statement is TRUE? A. This person is prohibited from contributing to a Roth IRA in that year B. This person can contribute a maximum of $3,000 to a Roth IRA C. This person can contribute a maximum of $4,000 to a Roth IRA D. This person can contribute a maximum of $6,000 to a Roth IRA

C. This person can contribute a maximum of $4,000 to a Roth IRA

All of the following statements are true regarding both mutual funds and variable annuities EXCEPT: A. the return to investors is dependent on the performance of the securities in the underlying portfolio B. the Investment Company Act of 1940 is the regulating legislation C. distributions from the underlying mutual fund are taxable to the holder in the year the distribution is made D. the underlying portfolios are managed

C.

In 2020, a self-employed doctor contributes the maximum permitted amount to a Keogh plan. The doctor has a full time nurse earning $60,000 per year. The contribution to be made for the nurse is: A. $5,500 B. $12,000 C. $15,000 D. $17,500

C. $15,000

A customer invests $30,000 in a non-qualified variable annuity. Over the years, it has grown in value to $50,000. The customer's cost basis in the annuity contract is: A. 0 B. $20,000 C. $30,000 D. $50,000

C. $30,000

In 2020, a customer earns $500,000 as a self-employed doctor. The maximum contribution to a Keogh plan is: A. $27,000 B. $50,000 C. $57,000 D. $100,000

C. $57,000

A husband and wife wish to open a spousal IRA. The wife works while the husband does not. What is the permitted maximum contribution to this spousal IRA for the year 2020? A. $6,000 for the wife; $0 for the husband B. $6,000 for the wife; $3,000 for the husband C. $6,000 for the wife; $6,000 for the husband D. $60,000 for the wife; $60,000 for the husband

C. $6,000 for the wife and $6,000 for the husband

Which retirement plan is corporate sponsored and permits employees to make the greatest pre-tax contribution? A. Roth IRA B. SIMPLE IRA C. 401(k) D. 403(b)

C. 401k

Distributions from Roth IRAs are subject to a penalty if withdrawals are made within: A. 1 year of original contribution B. 3 years of original contribution C. 5 years of original contribution D. 10 years of original contribution

C. 5 years of original contribution

Which statement is TRUE about federal taxation of contributions to 529 plans? A. Contributions are tax deductible to the donor B. Contributions are capped at $10,000 annually C. A 1-time gift of up to 5 times the gift tax exclusion amount can be given that will not be subject to gift tax D. A 1-time gift of up to 10 times the gift tax exclusion amount can be given that will not be subject to gift tax

C. A 1 time gift tax of up to 5x the gift tax

Under Keogh rules, any distributions from a Keogh Plan must start no later than: A. April 1st of the year following the year the individual turns 59 1/2 B. December 31st of the year following the year the individual turns 69 1/2 C. April 1st of the year following the year the individual turns 72 D. April 15th of the year following the year the individual turns 72

C. April 1st of the year following the year the individual turns 72

Which statement is TRUE when a non-qualified variable annuity is annuitized prior to age 59 1/2 under the provisions of IRS Rule 72t? A. 100% of each payment will be taxable at ordinary income rates B. 100% of each payment will be non-taxable C. Each payment received will be partially taxable but the 10% penalty tax will not be applied D. Each payment received will be partially taxable and the 10% penalty tax will be applied

C. Each payment received will be partially taxable but the 10% penalty tax will not be applied

Retirement plans that must comply with ERISA requirements include all of the following EXCEPT: A. Defined benefit plans B. Profit sharing plans C. Federal Government plans D. Payroll deduction savings plans

C. Federal Government plans

Which annuity payout option usually results in the largest periodic payment? A. Unit Refund Annuity B. Joint and Last Survivor Annuity C. Life Annuity D. Life Annuity-Period Certain

C. Life Annuity

A 50-year old man owns a non-qualified variable annuity contract that has appreciated substantially over the years. He wishes to annuitize the account for additional income using IRS Rule 72t. How will the first payment be taxed? A. 100% taxable ordinary income B. 100% non-taxable cost basis C. Part ordinary income and part cost basis D. 10% penalty tax applied because the client is under age 59 1/2

C. Part ordinary income and part cost basis

An annuitized account in a variable annuity is most similar to: A. a mutual fund B. a whole life insurance unit C. pension payments D. an individual retirement account

C. Pension plans

A 50-year old man becomes totally disabled. He wishes to take a lump sum distribution from his Individual Retirement Account to pay for medical and living expenses. Which statement is TRUE? A. The distribution is not subject to any tax B. The distribution is subject solely to a penalty tax of 10% C. The distribution is subject solely to regular income tax D. The distribution is subject to regular income tax plus a 10% penalty tax

C. The distribution is subject solely to regular income tax

Which statement is FALSE about a SIMPLE IRA? A. The maximum annual contribution is higher than for a Traditional IRA B. The contribution is made by the employee, who gets a salary reduction for the amount contributed C. The plan is available to any size employer D. The employer must make a matching contribution

C. The plan is available to any size employer

All of the following statements are true regarding defined benefit plans EXCEPT: A. contributions made to the plan can vary from year to year B. employees with the highest salaries and the fewest years to retirement benefit the most C. benefits paid to employees consists of a tax free return of capital and a taxable return of earnings D. actuarial tables are used to determine contribution rates for each employee

C. benefits paid to employees consists of a tax free return of capital and a taxable return of earnings

All of the following are permitted investments in Individual Retirement Accounts EXCEPT: A. U.S. minted gold coins B. U.S. issued securities C. Commodity futures D. Bank certificates of deposit

C. commodity futures

Generally, if a non-spouse inherits an IRA, the beneficiary must: A. roll over the IRA proceeds into an existing IRA owned by the beneficiary B. elect to receive the entire IRA proceeds as an immediate lump sum C. elect to receive the entire proceeds over the next 10 years D. elect to receive the entire proceeds over his or her life expectancy

C. elect to receive the entire proceeds over the next 10 years

Which rollover would result in a tax event? A. Exchange of one variable annuity contract for another variable annuity contract B. Exchange of a life insurance contract for a variable annuity contract C. Exchange of a variable annuity contract for a life insurance contract D. Exchange of a life insurance contract for another life insurance contract

C. exchange of variable annuity contract for a life insurance contract

All of the following are features of variable annuities EXCEPT: A. professional management B. right to vote for change in objectives C. insured against losses D. death benefits

C. insured against losses

If a corporation has an unfunded pension liability, this means that: A. inflation has eroded the value of the portfolio funding the plan B. the plan is in default because the existing retirees' benefit claims are not being met C. the expected future value of fund assets is less than projected benefit claims D. the expected future value of fund assets is more than projected benefit claims

C. the expected future value of fund assets is less than projected benefit claims

A 50 1/2 year old self-employed individual has a balance of $200,000 in his HR 10 plan. This balance is composed of $140,000 of contributions and $60,000 of earnings. The individual decides to withdraw $100,000 from the plan. Which statement is TRUE? A. There will be no tax liability B. There will be regular tax liability, but no 10% penalty tax liability C. There will be a 10% penalty tax liability, but no regular tax liability D. There will be both regular tax liability and a 10% penalty tax liability

D. There will be both regular tax liability and a 10% penalty tax liability

Which statement is TRUE about the taxation of dividends, interest and capital gains in the separate account during the accumulation phase? A. All dividends, interest and capital gains are taxable in the year received B. Dividends and interest are taxable in the year received; capital gains are tax deferred C. Dividends and interest are tax deferred; capital gains are taxable in the year received D. All dividends, interest and capital gains are tax deferred

D. All dividends, interest and capital gains are tax deferred.

Contributions to Individual Retirement Accounts must be made by: A. December 31st of the calendar year in which the contribution may be claimed on that person's tax return B. April 15th of the calendar year in which the contribution may be claimed on that person's tax return C. December 31st of the calendar year after which the contribution may be claimed on that person's tax return D. April 15th of the calendar year after which the contribution may be claimed on that person's tax return

D. April 15th of the calendar year after which the contribution may be claimed on that person's tax return

A working couple has a combined income of $150,000. Neither are covered by an employer sponsored pension plan. Which statement is TRUE about IRA contributions by these persons? A. IRA contributions are prohibited since these persons can be covered by an employer sponsored plan B. IRA contributions are prohibited since these persons' income exceeds allowed limits C. IRA contributions are permitted; however the contribution amount is not deductible D. IRA contributions are permitted with the contribution amount being tax deductible

D. IRA contributions are permitted with the contribution amount being tax deductible

Which of the following annuity payment options will pay the estate of the annuitant if the full value of the account was not received? A. Life Annuity B. Life Annuity with Period Certain C. Joint and Last Survivor Annuity D. Unit Refund Annuity

D. Unit refund annuity

All of the following statements are true about non-contributory defined benefit retirement plans EXCEPT: A. contribution amounts vary based upon the age of the person covered under the plan B. larger contributions are made for older plan participants nearing retirement than for younger ones C. once benefit payments start, the amount of the benefit is fixed D. contribution amounts remain fixed based regardless of age

D. contribution amounts remain fixed based regardless of age

All of the following terms are associated with variable life insurance EXCEPT: A. permanent B. cash value C. policy loan D. flexible premium

D. flexible premium

The owner of a variable annuity has all of the following rights EXCEPT the right to vote: A. for the Board of Trustees B. for dissolution of the trust C. to change the separate account's investment objective D. for the sales charge imposed by the trust

D. for the sales charge imposed by the trust

A client surrenders a variable annuity contract 5 years after purchase because of poor performance. Any surrender fee imposed: A. increases cost basis B. reduces cost basis C. is deductible D. is not deductible

D. is not deductible

When a non-qualified variable annuity is annuitized prior to age 59 1/2 under the provisions of IRS Rule 72t, the initial payment is: A. 100% taxable as ordinary income and the 10% penalty tax will be applied B. 100% taxable as ordinary income but the 10% penalty tax is not applied C. partially taxable as ordinary income with the 10% penalty tax applied and partially a non-taxable return of investment D. partially taxable as ordinary income without the 10% penalty tax applied and partially a non-taxable return of investment

D. partially taxable as ordinary income without the 10% penalty tax applied and partially a non-taxable return of investment

A registered representative has a customer, age 50, in the 35% tax bracket, who just sold his house for a 1-time gain. The customer intends to downsize, and after buying a smaller home, will have $400,000 to invest. The customer intends to retire in 15 years. The registered representative could recommend that the customer purchase a variable annuity separate account with a growth objective because: A. once the customer reaches retirement age, there is no tax due on distributions taken B. a variable annuity investment held long term will always outperform a fixed annuity contract C. the contribution will be tax deductible, giving the customer a substantial 1-time tax savings D. the earnings build tax-deferred during the 15 year period until retirement

D. the earnings build tax-deferred during the 15 year period until retirement

Which of the following are characteristics of Defined Contribution Plans? I Annual contribution amounts are fixed II If the corporation has an unprofitable year, the contribution may be omitted III The annual benefit varies dependent on the number of years that the employee is included IV This type of plan is not subject to ERISA requirements

I and III

Which of the following statements are TRUE regarding a defined benefit plan? I The smallest contributions are for those individuals who are far away from retirement II The smallest contributions are for those individuals who are nearing retirement III The largest benefits will be paid to high salaried employees nearing retirement IV The largest benefits will be paid to low salaried employees the furthest away from retirement

I and III

The "death benefit" associated with a variable annuity contract: I applies prior to annuitization II applies after annuitization III means that, upon death, the insurance company will make a lump sum payment to complete the terms of the contract IV means that, upon death, the insurance company will pay a beneficiary at least the amount invested in the contract

I and IV

Which of the following statements about 403(b) Plans are TRUE? I Contributions are tax deductible to the employee II Contributions are not tax deductible to the employee III These plans are available to employees of any organization IV These plans are available to non-profit organization employees only

I and IV

Which of the following statements are TRUE when describing the "build-up" in a variable annuity separate account during the accumulation phase? I All interest, dividends, and capital gains from the securities in the account are automatically reinvested to buy more accumulation units II All interest, dividends, and capital gains from the securities in the account can either be paid to the contract holder or can be automatically reinvested to buy more accumulation units III All interest, dividends, and capital gains from the securities in the account are taxable IV All interest, dividends, and capital gains from the securities in the account are tax deferred

I and IV

Which statements are TRUE regarding RMDs (Required Minimum Distributions) from IRA accounts? I The RMD is based on the life expectancy of the account beneficiary II The RMD is based on the investment value of the account III If the RMD is not taken, a penalty tax of 10% is applied IV If the RMD is not taken, a penalty tax of 50% is applied

I and IV

Which of the following statements are TRUE regarding tax sheltered annuities for employees of non-profit organizations? I These are known as 401(k) plans II These are known as 403(b) plans III Monies contributed to this plan are excluded from taxable income IV Monies contributed to this plan are included in taxable income

II and III

Which of the following statements are TRUE regarding contributions to, and distributions from, non-tax qualified retirement plans? I Contributions are made with before tax dollars II Contributions are made with after tax dollars III Distributions are 100% taxable IV Distributions are partially tax free, with the amount above the original cost basis being taxed

II and IV

Which of the following statements are TRUE regarding the "AIR" stated in a variable annuity prospectus? I The AIR is an aggressive illustration of an interest rate for the annuity II The AIR is a conservative illustration of an interest rate for the annuity III The AIR is the minimum guaranteed rate of return IV The AIR is not a guaranteed rate of return

II and IV