LLQP Segregated Funds & Annuities · Component 1.3 · 35% of the exam
An 'emergency fund' need in retirement is typically:
- AUnnecessary, since retirees have guaranteed income and fewer surprises than working clients
- BMet by the annuity, since the monthly payments can be redirected when an emergency arises
- CHeld in equity funds, since they can be sold on any business day
- Several months of expenses in liquid, stable investments, separate from long-term assets
Correct answer: D) Several months of expenses in liquid, stable investments, separate from long-term assets
Liquidity reserves protect the long-term plan from sequence risk and emergencies.
Why the other options are wrong
- ARetirees face emergencies such as health and home costs.
- BAnnuity income is fixed and cannot be accelerated.
- CEquities are volatile; a forced sale in a downturn locks in losses.
Exam tip
Retirement emergency fund: liquid, stable, separate.
Common mistake
Counting on selling equity funds for emergencies.
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
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