Speak with a Registered Agent: 1-866-223-2121

Speak with a Registered Agent: 1-866-223-2121

Longevity Annuities Can Protect Your Future Retired Self


A lot of factors should go into whether or not you buy a longevity annuity to ensure that you never run out of money in retirement.  The first things to consider should be your health and your family history.  If you are healthy in early retirement and many people in your family have lived past age 85, a longevity annuity might be a good purchase to ensure your financial future.  Of course, this certainly doesn’t mean that you will live to be 95 or 100, but you will be able to maintain your standard of living if you are lucky enough to live to a ripe old age.  These longevity annuities are sometimes known as longevity insurance and provide you payments, much like a pension, to last your lifetime.  Consumer Reports published an article last month giving examples of how a “Longevity annuity alleviates worries about outliving your money.”

One retirement income professor estimates that using 10% of your retirement portfolio to buy a longevity annuity is sufficient to give you a consistent cash flow in your later retirement.  You give a lump sum payment, for the example in the article of $100,000, to an insurance company and start receiving payments at a pre-chosen date in the future.  The age typically chosen to start payments is from 80-90.  By making sure that your later life is fully financed, you are free to live your early retirement years as you choose with the rest of your portfolio.  Some people buy other annuities to meet their daily expenses and then invest the rest of their savings elsewhere.  Vacationing and spending as you wish is easier when you know that you will still have money should you live into your 90’s.

Not too many insurance companies are offering longevity annuities yet, because they are a newer type of annuity insurance.  The article pointed out the difference in payouts when comparing four different longevity annuities from four different companies.  A 65-year old man buying a $100,000 annuity in which he wanted to start receiving payments at age 85 would get a yearly payout of $62,950 from New York Life’s Guaranteed Future Income Annuity.  Symetra, MassMutual, and MetLife all offered smaller payouts in this scenario.  Assuming that this man lives to be 95, his total payout for this $100,000 annuity would be $629,500.  That can be a spectacular insurance investment, but make sure you know the potential downsides.

If you die at an earlier age than you anticipated, you lose out on the money you put in and the yearly payouts.  Adding a cash option for your heirs reduces your yearly payments, but ensures that your family will at least get the $100,000 you put in just in case you do not.  Since you buy longevity annuities decades before receiving payments from them, the insurance company could possibly go out of business before you are paid out.  This is highly unlikely, especially if you use an insurer with high financial strength ratings, and most states do guarantee at least $100,000 for annuities.  Inflation will reduce the amount of purchasing power that your longevity annuity really gives you with those yearly payouts.  But annuities are bought for their insurance, rather than their return in most cases, so your insurance is the major benefit.  You can also combat inflation in other areas of your portfolio.

Consumer Reports thinks that longevity annuities are worth a look, so see what they might have to offer you and your future retired self.

Written by Rachel Summit

Follow Rachel, aka Finance Mama, on Twitter and Google+

For more information about the product mentioned in this article contact us here:

Newest Blog Posts

Information Request Form

If you have questions or would like more information, please complete this form and a licensed professional will be happy to help. For the fastest response, please select 'Phone' as your Contact Preference.

By providing your information and clicking 'Submit' above, you acknowledge that you have read and agree to this site's privacy policy. You also provide your consent to be contacted at the email address or phone number provided above (including any wireless number) by licensed agents or representatives from or on behalf of Somerset Wealth Strategies, LLC and other companies to provide the information requested and/or offer annuities or financial products. You understand that these calls or SMS messages may be generated using an automated telephone dialing system, a pre-recorded message, or artificial voice. Consent to receive such messages is not a condition to purchase any goods or services. You may opt out at any time by following the instructions in the messages you receive.  Receiving quotes and information through our website is free, and you are under no obligation to purchase any goods or services as a result of this request. You affirm that you are the subscriber of the provided telephone number or that the subscriber authorized you to provide the number. Message and data rates may apply. Somerset Wealth Strategies, LLC is committed to respecting your privacy and adhering to all applicable laws and regulations, including the Telephone Consumer Protection Act (TCPA).