PSI Life Exam Practice Test

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Prepare for the PSI Life Exam Test. Study using interactive flashcards and multiple-choice questions, each with detailed hints and explanations. Get exam-ready efficiently!

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What is a common reason for purchasing a fixed annuity?

High risk investment
Immediate liquidity
Future economic security
Variable income

The correct answer is: Future economic security

A common reason for purchasing a fixed annuity is to secure future economic stability. Fixed annuities provide a guaranteed income stream for a specified period or for the lifetime of the annuitant, which can help in planning for retirement or achieving financial security in later years. This predictability and security make fixed annuities an attractive option for individuals who prefer a stable income versus the volatility associated with other investment vehicles. Investors often turn to fixed annuities to ensure they have a reliable source of income to cover essential expenses, knowing that their principal investment is generally protected from market fluctuations. This can alleviate concerns about running out of money in retirement, making fixed annuities a strategic choice for long-term financial planning. In contrast, high-risk investments are not associated with fixed annuities since they seek to minimize risk. Immediate liquidity is not a primary characteristic of fixed annuities, as they often come with surrender charges and lock-in periods that limit access to funds. Variable income is also contrary to the nature of fixed annuities, which provide fixed payments rather than variable returns dependent on market conditions.