Which aspect of an annuity offers a predictable income stream during retirement?

Which aspect of an annuity offers a predictable income stream during retirement?

• A. Asset allocation
• B. Fixed payment schedule
• C. Market volatility
• D. Investment risk

Answer: (B)

The aspect of an annuity that provides a predictable income stream during retirement is the fixed payment schedule. When an individual purchases a fixed annuity, they enter into a contract that guarantees regular payments for a specified period or for the rest of their life. This scheduled series of payments creates a reliable and consistent income source throughout retirement, allowing retirees to budget their finances effectively. In contrast, factors such as asset allocation, market volatility, and investment risk do not directly relate to the nature of annuity payments. Asset allocation refers to how investments are distributed across different asset classes to balance risk and return, which does not guarantee the same level of income predictability as a fixed annuity payment. Market volatility pertains to fluctuations in the value of investments, which can create uncertainty about future income levels, especially from variable investments. Investment risk covers the possibility of losing capital or investment returns but does not ensure a fixed and reliable income stream. Thus, the fixed payment schedule is the key feature that ensures predictability in retirement income from an annuity.

The aspect of an annuity that provides a predictable income stream during retirement is the fixed payment schedule. When an individual purchases a fixed annuity, they enter into a contract that guarantees regular payments for a specified period or for the rest of their life. This scheduled series of payments creates a reliable and consistent income source throughout retirement, allowing retirees to budget their finances effectively.

In contrast, factors such as asset allocation, market volatility, and investment risk do not directly relate to the nature of annuity payments. Asset allocation refers to how investments are distributed across different asset classes to balance risk and return, which does not guarantee the same level of income predictability as a fixed annuity payment. Market volatility pertains to fluctuations in the value of investments, which can create uncertainty about future income levels, especially from variable investments. Investment risk covers the possibility of losing capital or investment returns but does not ensure a fixed and reliable income stream. Thus, the fixed payment schedule is the key feature that ensures predictability in retirement income from an annuity.