A:

Which investment would be most suitable for a client investing for retirement and seeking protection from purchasing power risk in the future?



A. Corporate bonds
B. Preferred stocks
C. Fixed annuities
D. Variable annuities




The correct answer is "D" because the other three options offer fixed returns that would not protect against inflation. Variable annuities are appropriate since the client is investing for retirement. If the question involves a client who needs access to the money prior to retirement, variable annuities would not be correct.



RELATED FAQS
  1. What is the difference between a fixed and variable annuity?

    Understand the difference between fixed, variable and indexed annuities, and read a brief summary of their respective risks ... Read Answer >>
  2. Are variable annuities safe?

    Discover how several layers of protection are instituted, and how regulatory laws by FINRA and the SEC are utilized to make ... Read Answer >>
  3. How safe are variable annuities?

    Discover more about variable annuities, what they offer individuals entering retirement and what forms of protection are ... Read Answer >>
  4. What are the main kinds of annuities?

    Learn about the four basic types of annuities, and why the different investment and payout options are suitable for different ... Read Answer >>
  5. What are the risks of annuities in a recession?

    Distinguish between the most common types of annuities, and understand which types of annuities pose the most risk during ... Read Answer >>
  6. What type of investor should consider annuities?

    Learn about the features and benefits of annuities and when to consider one. Investors seeking to secure income for retirement ... Read Answer >>
Related Articles
  1. Retirement

    Variable Annuities: The Good, The Bad and the Ugly

    An in-depth guide to everything you need to know and watch out for with variable annuities.
  2. ETFs & Mutual Funds

    Are You Buying Annuities Or Mutual Funds?

    Investing a client's money in variable annuties is becoming a target for criticism.
  3. Retirement

    How a Variable Annuity Works After Retirement

    These investments can provide extra income after you retire. Here’s a guide to when and how you will receive the payout.
  4. Financial Advisor

    How to Buy Annuities When Interest Rates Are Low

    The current low interest rate environment complicates the decision to buy an annuity. Here's what financial advisors need to consider for their clients.
  5. Retirement

    Variable Annuity Basics

    Find out how variable annuities can help you plan for retirement by offering the returns of the stock market with the guarantee of insurance.
  6. Personal Finance

    Watch Your Back In The Annuity Game

    Find out how to get the upper hand when dealing with this payout challenge.
  7. Retirement

    Who Benefits From Retirement Annuities

    Annuities guarantee some degree of fixed income in retirement. But is the security worth the fees and less favorable tax treatment? How to decide.
  8. Retirement

    Annuities: A Solution for Baby Boomer Retirees?

    Annuities can provide guaranteed lifetime income at a time when retirement outlooks are seemingly bleak. Here's the lowdown on why they can be good.
  9. Financial Advisor

    Variable Annuities: The Pros and Cons

    Variable annuities are one of the most complicated financial instruments. Here is an in depth look at their pros and cons.
  10. ETFs & Mutual Funds

    Variable Annuities: The Do-It-Yourself Pension Plan

    Variable annuities can cost more than mutual funds, but that might be worth the protection they can add to your retirement.
RELATED TERMS
  1. Valuation Period

    The time between the end of the business day of the first business ...
  2. Hybrid Annuity

    An insurance contract that allows buyers to allocate funds to ...
  3. Variable Annuity

    An insurance contract in which, at the end of the accumulation ...
  4. Income Annuity

    Annuities designed to start paying income as soon as the policy ...
  5. Annuity

    A financial product that pays out a fixed stream of payments ...
  6. Individual Retirement Annuity

    A retirement investment vehicle that is structured similarly ...
Hot Definitions
  1. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  2. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  3. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  4. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  5. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  6. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
Trading Center