Washington Life Producer Practice Exam

When a client is considering an annuity, what is one critical factor to evaluate?

1. Market volatility

2. Monthly premium costs

3. Future tax implications

4. Financial objectives

The correct answer is: Financial objectives

When evaluating an annuity, understanding the client's financial objectives is crucial. Annuities are designed to meet specific financial goals, such as providing a steady income during retirement, accumulating savings tax-deferred, or creating a legacy for beneficiaries. By identifying these objectives, the advisor can help select the right type of annuity—whether it's a fixed, variable, or indexed annuity—that aligns with the client's needs, risk tolerance, and time horizon. This alignment ensures that the annuity serves its intended purpose effectively. Other factors, while relevant, do not address the client’s personal goals as directly. Market volatility may affect investment performance, yet it is essential to tie those fluctuations to the client's objectives. Monthly premium costs are important for budgeting but must also fit within the broader context of what the client hopes to achieve financially. Future tax implications are critical for understanding the overall impact on the client’s finances but should ultimately guide decisions that align with the financial objectives established for the annuity. Thus, focusing on financial objectives ensures that the annuity fulfills its purpose in the client’s financial plan.