Final answer:
The exact monthly benefit not known in advance is associated with a variable annuity due to its dependence on investment performance, unlike fixed, indexed, or immediate annuities with predetermined payouts. The correct option is 2.
Step-by-step explanation:
The annuity where the exact monthly benefit is not known in advance is a variable annuity. Unlike fixed annuities, indexed annuities, or immediate annuities, which have predetermined payout structures, variable annuities are investment-linked and subject to market performance.
Retirees often encounter issues with fixed income streams from defined benefits plans, such as private company pensions, because they do not increase over time. This can lead to a loss of buying power due to inflation, substantially affecting the retiree's financial stability in the long term.