FINRA Series 6 Investment Company and Variable Contracts Products Representative ExaminationOpening and Maintaining Customer Accounts and Investment RecommendationsMedium
A client, a 50-year-old high-income professional, is seeking an investment that provides tax-deferred growth, professional management, and a guaranteed lifetime income option in retirement. They are comfortable with market risk for their growth component. Which product is most suitable?
- ATraditional IRA
- BVariable Annuity
- C529 Plan
- DFixed Annuity
Show answer & explanationAnswer & explanation
Correct answer: B. Variable Annuity
A variable annuity offers tax-deferred growth, professional management through subaccounts (which carry market risk), and can be annuitized to provide a guaranteed lifetime income stream. This aligns with all aspects of the client's stated goals.
Why the other options are wrong
- A. Traditional IRAs offer tax-deferred growth but typically do not have built-in lifetime income guarantees or professional management tied to specific subaccounts.
- C. 529 plans are for education savings and do not offer lifetime income or general retirement planning.
- D. Fixed annuities offer guaranteed interest but no market growth potential.
Variable Annuity Suitability
A variable annuity is suitable for individuals seeking tax-deferred growth, professional management, and a potential income stream in retirement, who are comfortable with market risk.
- Tax-deferred growth
- Professional management (subaccounts)
- Guaranteed lifetime income (annuitization)
- Market risk exposure
Memory trick: Variable annuities vary with the market for a lifetime of income.