TNL LLQP Segregated Funds and Annuities Practice Exam 2025 – Complete Prep Guide

Question: 1 / 400

What is the potential impact of inflation on Stan's overall financial situation?

It can decrease his investment values

It can increase his annuity payments

It can erode purchasing power over time

The potential impact of inflation on Stan's overall financial situation is that it can erode purchasing power over time. Inflation refers to the general increase in prices and the decline in the purchasing power of money. This means that as prices rise, each unit of currency buys fewer goods and services. For individuals, this can be particularly concerning as their income, savings, and investment returns may not keep pace with inflation.

As a result, the value of money declines, impacting Stan's ability to buy the same goods and services in the future that he could afford today. This is especially significant for those relying on fixed-income sources, such as certain annuity payments, which do not adjust for inflation. Understanding this aspect of inflation is crucial for effective financial planning, as it emphasizes the need for investments that can potentially outpace inflation and maintain or enhance purchasing power over time.

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It can improve his cash flow

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