Tennessee Life Producer Practice Exam

Which type of annuity would P NOT buy if she wants a lifetime income stream beginning at age 60?

1. An immediate annuity

2. A deferred annuity

3. A fixed annuity

4. A variable annuity

The correct answer is: An immediate annuity

The focus is on the type of annuity that would not be suitable for P if she desires a lifetime income stream starting at age 60. An immediate annuity provides guaranteed income payments that begin right after a lump sum investment is made, typically within a year. Therefore, if P is planning for an income stream that starts immediately, this annuity would be appropriate. However, the question specifies that P wants a lifetime income that begins at a future date (specifically, age 60). In this context, an immediate annuity would not be the right choice because it starts paying out benefits much sooner than the desired age of 60. Instead, a deferred annuity would allow P to accumulate funds and then convert to an income stream that begins at age 60, making it suitable for her needs. In summary, since an immediate annuity pays out benefits without any waiting period and does not align with P's specified timeline for income beginning at age 60, it is not the right choice for her situation.