Managing Lifetime Income

Question 1

Annuity

Answer 1

An annuity is a contract between you and an insurance company, under which you make a lump-sum payment or series of payments. In return, the insurer agrees to make periodic payments to you beginning immediately or at some future date.

Question 2

Bond

Answer 2

A debt security, similar to an IOU. When you buy a bond, you are lending money to the issuer. In return for the loan, the issuer promises to pay you a specified rate of interest during the life of the bond and to repay the principal when it “matures,” or comes due.

Question 3

Fixed Annuity

Answer 3

An insurance product that promises a minimum rate of interest while your account is growing. The insurance company also guarantees that the periodic payment will be for a set amount for a fixed period, such as 20 years, or an indefinite period, such as your lifetime.

Question 4

Investment Adviser

Answer 4

An investment adviser is a firm or an individual that, for compensation, engages in the business of advising others as to the value of securities or as to the advisability of investing in, purchasing, or selling securities. An investment adviser can also be a firm or individual that, for compensation and as part of a regular business, issues analyses or reports concerning securities.

Question 5

Lump Sum Payment

Answer 5

A payment of a sum of money at one time, such as an inheritance.

Question 6

Risk Tolerance

Answer 6

An investor’s ability and willingness to lose some or all of an investment in exchange for greater potential returns.

Question 7

Stock

Answer 7

An instrument that signifies an ownership position (called equity) in a corporation, and a claim on its proportional share in the corporation’s assets and profits. Most stocks also provide voting rights, which give shareholders a proportional vote in certain corporate decisions, such as the election of corporate directors.