New Jersey Life and Health State Practice Exam

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Question: 1 / 190

Which annuity benefit option guarantees that the owner cannot outlive their benefits?

Fixed period annuity

Guaranteed lifetime withdrawal benefit

The option that guarantees the owner cannot outlive their benefits is the guaranteed lifetime withdrawal benefit. This provision allows the annuity owner to withdraw a certain amount of money annually for the rest of their life, regardless of the account balance.

This lifetime income feature ensures that even if the account value diminishes to zero due to withdrawals or market performance, the owner will continue to receive payments. The benefit is particularly appealing to those concerned about longevity risk—the possibility of living longer than their savings will last.

This option is designed specifically with the intent of providing financial security throughout the owner's lifetime, which is crucial for retirement planning. In contrast, other options, such as a fixed period annuity or a variable annuity, may not provide the same level of assurance concerning lifetime payouts. A fixed period annuity only pays benefits for a specified term, while a variable annuity's payments depend on investment performance and can fluctuate, potentially leading to a scenario where the owner could outlive their benefits. An immediate annuity, while it provides immediate income for a certain period or lifetime, does not inherently guarantee withdrawals beyond the initial investment if the structure does not include a lifetime option.

Variable annuity

Immediate annuity

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