Chapter 7- Retirement Plans

Typically, accumulation units of variable annuities represent an investment in underlying:

Mutual fund shares

During the accumulation phase of a variable annuity:

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

What is true when comparing a Life Annuity to a Life Annuity with Period Certain?

The periodic payment for a Periodic Certain Annuity will be lower than the periodic payment for a Life Annuity

What is true about the taxation of dividends, interest and capital gains in the separate account during the accumulation phase?

All dividends, interest and capital gains are tax deferred

Define Annuity Unit

An accounting measure upon which the amount of pay out is determined. Once a variable annuity contract is annuitized, accumulation units are converted to annuity units. These determine the annuity payments to be made.

What is true regarding both mutual funds and variable annuities that are in the accumulation phase?

Both are regulated by the Investment Company Act of 1940 Both have portfolios that are managed Asset appreciation is untaxed for both

To sell variable annuities, a sales person must be registered with-

FINRA, State Insurance Commission, and the SEC (Not required to be registered with the State Banking Commission)

What is true about non-qualified variable annuities?

Investments held in the separate account grow tax-deferred

To sell a variable annuity, what licenses are needed?

Series 6 or Series 7 plus a state insurance license

In a period of inflation, it would be expected that payments from a:

Variable annuity contract would increase

Variable Annuity contracts:

have the purchaser bear the investment risk & are non-exempt securities