LLQP Segregated Funds & Annuities · Component 1.3 · 35% of the exam
'Inflation risk' in retirement planning means:
- APrices fall during retirement, so fixed income buys more than expected and savings are over-accumulated
- BTaxes rise during retirement, reducing the after-tax value of a fixed pension
- Fixed income loses purchasing power over a long retirement
- DMarkets crash during the early years of retirement, when withdrawals do the most damage
Correct answer: C) Fixed income loses purchasing power over a long retirement
A 25-year retirement with fixed income can see purchasing power fall substantially. Needs analysis must include inflation.
Why the other options are wrong
- AInflation raises prices; it does not lower them.
- BTax risk is separate from inflation.
- DA market crash is market or sequence risk, separate from inflation.
Exam tip
Fixed retirement income + long horizon = inflation risk; keep some growth or indexing.
Common mistake
Annuitizing everything without indexing for a 60-year-old.
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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