Practice Quiz

FINRA Series 6

Category - Series 6

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Mr. R. Retired recently turned 61 and has decided to annuitize a variable annuity contract in which he had been investing. When he does so:
  1. he will have to pay a 10% penalty for annuitizing the contract before he turned 62 ½.
  2. his accumulation units will be converted into a fixed number of annuity units.
  3. the value of his annuity units becomes fixed.
  4. Both B and C are true statements.
Explanation
Answer: B - When Mr. R. Retired decides to annuitize his variable annuity contract at the age of 61, his accumulation units will be converted into a fixed number of annuity units. The value of these units will depend on the actual returns earned by the account and the actuarially-determined assumed interest rate; it is not fixed. Mr. Retired will not be subject to a 10% penalty since he is over 59 ½ years old.
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