Final answer:
An immediate annuity is best suited for someone who has received a lump sum retirement buyout and wants an immediate, guaranteed income for life. It offers the benefit of commencing payouts soon after the investment, unlike fixed, variable, or deferred annuities which have different features and payouts schedules.
Step-by-step explanation:
The type of annuity best suited for a student who has received a $500,000 lump sum retirement buyout and desires a guaranteed income for life is an immediate annuity. This is because an immediate annuity starts to pay out right after the lump sum is invested. Comparing the options, a fixed annuity provides payments that don't change over time and may not keep up with inflation, potentially leading to a loss of buying power. A variable annuity allows for investment in various securities, offering the potential for growth but also comes with more risk. Deferred annuities, on the other hand, are meant for income to begin at a later date, which doesn't align with the need for immediate income. Given the aspect of wanting guaranteed income that starts immediately, the immediate annuity is the clear choice.