LLQP Segregated Funds & Annuities · Component 2.3 · 30% of the exam
A retiree wants guaranteed income for essential expenses but flexibility for everything else. The most suitable approach is generally to:
- annuitize enough to cover essential costs and keep the balance invested for flexibility
- Bannuitize the whole portfolio so that every expense is covered by a guaranteed payment
- Cplace everything in a money market fund so the capital is available on short notice at all times
- Davoid annuities entirely and rely on systematic withdrawals from an equity fund each month
Correct answer: A) annuitize enough to cover essential costs and keep the balance invested for flexibility
Covering essential spending with guaranteed income removes the risk of being forced to sell in a downturn, while the remaining capital stays available for discretionary needs and for the estate. This is often called building an income floor.
Why the other options are wrong
- BFull annuitization removes the flexibility the client has explicitly said she wants.
- CA money market holding offers access but will not keep pace with rising costs.
- DRelying on withdrawals from an equity fund leaves essential spending exposed to markets.
Exam tip
Income floor first, flexible capital second, is the standard retirement income answer.
Common mistake
Treating the choice as annuity or no annuity rather than a combination of both.
What this tests
CISRO competency component 2.3 — Analyze the available products that meet the client's needs — which is weighted at 30% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 2
- A segregated fund's 'guaranteed amount' after a partial withdrawal under proportional reduction is:
- A distinctive estate advantage of a segregated fund over a non-registered mutual fund held jointly with a child is:
- Segregated fund guarantees are most valuable relative to their cost when:
- A segregated fund's annual statement reports:
- Compared with a segregated fund, an exchange-traded fund (ETF) generally offers:
- A segregated fund's 'automatic death benefit reset' feature:
Practice the whole Segregated Funds & Annuities module
Timed sets weighted like the exam, and review of every question you miss. Free to start.