LLQP Segregated Funds & Annuities · Component 1.3 · 35% of the exam
A client asks what 'safe withdrawal rate' she can take from her savings. The agent should explain:
- AThat 10% is the standard rate, since long-run equity returns comfortably cover it
- BThat no withdrawal is safe, since any drawdown eventually exhausts the capital
- That it depends on horizon, mix and returns, with about 4% as a common starting point
- DThat any rate is safe as long as the portfolio is held in a segregated fund with a maturity guarantee attached
Correct answer: C) That it depends on horizon, mix and returns, with about 4% as a common starting point
Withdrawal sustainability is a core retirement risk question. Guaranteed withdrawal products offer certainty at a cost.
Why the other options are wrong
- ATen percent is unsustainable for a long retirement.
- BSustainable withdrawal is achievable at a modest rate.
- DHigh rates deplete capital; guarantees do not cover withdrawals.
Exam tip
Sustainable withdrawal ~4% initial as a planning reference; GMWB removes the guesswork.
Common mistake
Promising a specific rate as 'safe' without stating assumptions.
What this tests
CISRO competency component 1.3 — Assess the client's needs and situation — which is weighted at 35% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 1
- The first step before recommending a segregated fund or annuity is to:
- A client's 'time horizon' for an investment is:
- 'Risk tolerance' in an investor profile refers to:
- A client says he wants 'high returns with no risk of losing money'. The agent should:
- Investment objectives are commonly classified as:
- Why is the client's marginal tax rate relevant to a segregated fund recommendation?
Practice the whole Segregated Funds & Annuities module
Timed sets weighted like the exam, and review of every question you miss. Free to start.