California Life-Only & Accident and Health AgentLife InsuranceMedium
A 50-year-old client is looking for an annuity that will provide a guaranteed income stream starting immediately, with payments that remain constant throughout their retirement. They are concerned about market fluctuations and want no investment risk. Which type of annuity would be most suitable?
- AFixed Deferred Annuity
- BVariable Immediate Annuity
- CVariable Deferred Annuity
- DFixed Immediate Annuity
Show answer & explanationAnswer & explanation
Correct answer: D. Fixed Immediate Annuity
A Fixed Immediate Annuity provides a guaranteed, constant income stream that begins immediately after purchase, with no investment risk, directly addressing the client's needs for immediate, stable, and risk-free payments.
Why the other options are wrong
- A. Deferred annuities delay income payments to a future date.
- B. Variable annuities involve investment risk and fluctuating payments.
- C. Variable deferred annuities involve investment risk and delay payments.
Fixed Immediate Annuity
An annuity that begins paying out a guaranteed, fixed income stream immediately (usually within one year) after the lump-sum purchase, with no investment risk to the annuitant.
- Income starts immediately
- Payments are fixed and guaranteed
- No investment risk
- Purchased with a single premium
Memory trick: Annuities are your 'future income fountain' – choose your flow.