PSI Life Exam Practice Test

What guarantee ensures that the annuitant cannot outlive their benefits?

1. Fixed payout policy

2. Guaranteed lifetime withdrawal benefit

3. Increased death benefit option

4. Annual adjustment plan

The correct answer is: Guaranteed lifetime withdrawal benefit

The concept of a guaranteed lifetime withdrawal benefit is designed to ensure that the annuitant receives a consistent stream of income for the entirety of their life, regardless of how long they live. This benefit allows the annuitant to withdraw a predetermined amount of money annually, guaranteeing that they will not outlive their benefits, even if their account balance drops to zero due to withdrawals. This option is particularly appealing to individuals concerned about the risk of depleting their retirement savings too early. In contrast, other options such as a fixed payout policy do not provide the same safety net, as the payouts are set and may run out if not carefully managed over time. An increased death benefit option focuses on the value or benefit left to heirs rather than ensuring income for the annuitant's lifetime. Finally, an annual adjustment plan typically involves adjustments based on inflation or other factors but does not inherently guarantee lifetime withdrawals. This makes the guaranteed lifetime withdrawal benefit a crucial feature for those looking for peace of mind regarding their financial future and longevity.