Best Immediate Annuities Combat Longevity Risk

The best immediate annuities can defend your financial future against longevity risk, or the possibility of outliving your money.  According to Insurance News Net’s article “Insure Against Longevity Risk with Immediate Annuities,” Mark Miller says that single premium immediate annuities can really secure your retirement.  They only make up about 2% of retiree income currently, but are expected to begin a comeback after flatlining during the economic crisis that started in 2008.  After making a one time payment to an insurance company, investors receive monthly income over the course of their lifetime with the best immediate annuities.  Sales were $7.9 billion in 2008, but have not seen significant growth since that time.

It looks like the SPIA is gaining popularity again though.  With an average buyer age of 73 and an average purchase price of $107,000, annuities help retirees generate income where people used to have pensions and social security to guarantee them payments.  Third party distribution channels are being used more by insurance companies to grow their immediate annuity business.  New York Life saw an increase of 45% in the first quarter and Fidelity, who offers New York Life annuities among others, saw a 25% increase from the fourth quarter of 2010 to the first quarter of this year.

The first step to purchasing the best immediate annuities is to figure out your monthly living expenses in retirement and deduct any social security or pension income you might have.  The gap between your monthly income and expenses will determine the monthly income you need from an annuity.  No one suggests using all of your savings to buy an annuity, but purchase one that will give you the monthly income you need to cover your basic expenses.  Some financial advisors worry that an annuity rates comparison will not give you as high of a return as some other investments and have some other concerns about annuities.  But with some research and more information from the insurance industry, they’ll see that the best immediate annuities can cover their clients against longevity risk.

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