Longevity Annuity

When things last forever…


The concept of longevity annuities is fairly new to the population as we all didn’t expect to live that long. In the United Stated, the life expectancy for a female is now 81 while male can hope to live up to 76. Nonetheless, it has become more frequent to see older people celebrating their 85th, 90th or even 100th birthday. It is surely awesome to see your children with their children and possibly grandchildren celebrating your anniversary. On the other side, this has a significant impact on your retirement plan if you haven’t think about it. This is where longevity annuity comes into play…


Longevity Annuity


What is a Longevity Annuity?


The longevity annuity itself is not really a new product. To be honest, it is only a new way some insurance companies had found to market an existing product. The longevity annuity is nothing more, nothing less than a deferred annuity contract. However, the usage of the product has another twist.


A New Purpose for Deferred Annuities


Deferred annuities are commonly used to build a pension plan. During several years, you accumulate money inside the annuity in the hope of building enough savings at retirement. The money is invested through a Life Insurance Company until you start withdrawing at retirement.


With longevity annuities, you purchase such products when you are already retired. The idea is to use a part of your retirement money, to make sure you have enough savings if you beat your life expectancy.  As opposed to an immediate annuity, the investor decides a future date where payments will start instead of entering in the distribution process within the same year. For example, an investor could decide to reduce his lifestyle at the age of 65 in order to purchase a longevity annuity that will start payment at the age of 85.


Such strategy could result in some hefty payments for the beneficiary. For example, a 65 years old investor with $200,000 could buy an annuity paying slightly under $14,000 today. But if he buys a longevity annuity until the age of 85, the payments could go up as high as $120,000. Most longevity annuity starts paying benefits between the age of 80 and 85.


Use it or Lose it


Are you ready to call an agent to enquire about longevity annuities? Wait! There is hick-up with the product. If you die before using the longevity annuity, your money is gone. No wonder those who live longer receive huge lump sum of payments, right?


While the payout could be very interesting, you may want to think twice before using an important sum to fund your longevity…


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