IFSE Institute Exam LLQP Topic 4 Question 3 Discussion

Actual exam question for IFSE Institute's LLQP exam

Question #: 3
Topic #: 4

Jessica is 61 years old and has $460,000 invested in a registered retirement savings plan (RRSP). She is retiring due to health issues that are expected to reduce her life expectancy and will prevent her from working until she is 65. She would like to transfer her RRSP funds into an annuity that will pay her monthly benefits for the rest of her life.

Which of the following annuities is the BEST option for her to purchase?

ATerm annuity to age 90.

BLife annuity.

CLife annuity with a 20-year guaranteed period.

DImpaired life annuity.

Show Suggested Answer

Suggested Answer: D

Due to Jessica's reduced life expectancy, an impaired life annuity would provide higher monthly payments than a standard life annuity. This type of annuity takes her medical condition into account, offering larger payouts based on a shorter expected payment period. LLQP resources recommend impaired life annuities for individuals with significant health issues, as these provide better income compared to other types.

Options A and C offer a fixed period but don't maximize monthly income for someone with a reduced life expectancy. Option B would provide a standard income for life but not the potentially enhanced income from an impaired annuity.

by Cecily at Oct 20, 2024, 07:38 PM

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Noelia

10 days ago

Wait, what's an 'impaired life annuity'? Is that like a discount for having a shorter life expectancy? That's kind of morbid, don't you think?

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Reena

11 days ago

Hmm, I'm not so sure. I think the life annuity with a 20-year guaranteed period (C) might be a better option. It'll provide her with a steady income for life, and the guaranteed period could give her some peace of mind.

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Onita

12 days ago

I agree with Jeffrey. The impaired life annuity seems like the most appropriate choice for Jessica's situation. She needs the income now, and this option will give her the highest monthly benefits.

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2 months ago

I think Jessica should go for the impaired life annuity.

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