Difficulty: Easy

Average Score: 87%

Which of the following guarantees the annuitant CANNOT outlive their benefits?

Rationale

Guaranteed lifetime withdrawal benefits ensure the annuitant CANNOT outlive their benefits.

These benefits provide a stream of income for the annuitant for their entire lifetime, regardless of the account balance, thereby guaranteeing that they will not outlive their financial resources.

A (Right of survivorship.) YOUR ANSWER

The right of survivorship pertains to the ownership of assets and the transfer of those assets to surviving owners upon the death of an owner. This concept does not relate to lifetime income guarantees or the annuitant's ability to outlive their benefits, as it primarily addresses asset inheritance rather than income provision.

B (Guaranteed lifetime withdrawal benefits.) CORRECT

This option specifically guarantees that the annuitant will receive income for life, regardless of how long they live or the performance of the underlying investment. It ensures that the annuitant cannot outlive their benefits, providing financial security throughout their lifetime.

C (Guaranteed minimum accumulation benefit.) YOUR ANSWER

The guaranteed minimum accumulation benefit refers to a promise that the account value will not fall below a specified minimum after a certain period. While this may provide some security regarding the account's value, it does not directly guarantee lifetime income, which is essential for ensuring that the annuitant does not outlive their benefits.

D (Simple income rider.) YOUR ANSWER

A simple income rider typically provides a predetermined income stream, but it may not guarantee payments for life or ensure that the annuitant will not exhaust their benefits. Such riders can have limitations or conditions that could result in benefits being outlived, depending on the terms of the contract.

Conclusion

In the context of annuities, guaranteed lifetime withdrawal benefits are vital as they ensure that the annuitant will receive income for the entirety of their life and cannot outlive their benefits. Other options, while providing various forms of security, do not offer the same level of assurance regarding lifetime income. Understanding these distinctions is critical for individuals planning for long-term financial stability in retirement.

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