Final answer:
Lauren should purchase a fixed annuity to receive a guaranteed income for life after retirement. Fixed annuities provide predictable payments but may pose the risk of decreased purchasing power due to inflation, which should be taken into consideration.
Step-by-step explanation:
If Lauren wants to secure a guaranteed income for life upon retirement, she should consider purchasing a fixed annuity. A fixed annuity is an insurance product that provides a steady, predictable stream of income in retirement, ensuring financial stability. Unlike investments in stocks, shares, or bonds, which can fluctuate in value, fixed annuities offer a safer investment with a predetermined payout. This can be particularly advantageous for retirees, as they may face the risk of outliving their savings or encountering unexpected health expenses.
One concern with fixed income products such as annuities is the effect of inflation over time. Despite the safety of consistent payments, inflation can erode purchasing power, resulting in a lower real income as years pass. This makes it crucial for individuals like Lauren to weigh the benefits of a guaranteed income against the potential disadvantages of fixed payments in the face of rising costs. To combat this, some annuities also offer options for cost-of-living adjustments, which can help to mitigate the effects of inflation.