Longevity annuities come in two different types and help to insure that you will not run out of money in retirement. They are essentially the opposite of life insurance, which leaves money behind in the case of an early death. Deferred income annuities and fixed indexed annuities with lifetime income riders are two ways to guarantee a stream of income that you cannot outlive. Annuity FYI recently put together a list of their recommended longevity annuities. The difference between a longevity annuity and other types of annuities that guarantee lifetime income is that the former is typically set up to be used later in life. Many longevity annuities start paying your income at the age of 80. This can be especially helpful when making plans to pay for long term care at an elderly age.
CNN Money discusses longevity annuities in their “Ultimate guide to retirement.” They recommend investing somewhere between 10% and 25% of your retirement savings in a longevity annuity. This will offer you the benefit of receiving guaranteed lifetime income, but will save money for your heirs if you invest it elsewhere. The main advantage of investing in longevity annuities is that you are protected against running out of money in retirement for a very affordable cost. Your money grows during the deferment period. You’ll also get similar spending power whether you invest 10-15% of your savings in a longevity annuity or 50-60% in an immediate annuity. That’s a big difference for delaying your payments. The main disadvantage to this product would come if an investor died before receiving any payments. Longevity annuities are the right investment for someone with a family history of longevity who is concerned about running out of money in retirement.
Currently, Annuity FYI has 11 longevity annuities in their comparison table. We believe that these products are good for investors who are looking to protect against longevity risk. MetLife’s Longevity Income Guarantee, New York Life’s Guaranteed Future Income, and American General’s Future Income Achiever are all deferred income longevity annuities with great benefits. Prudential’s Defined Income Variable Annuity is a little different because of the variable aspect. The next recommendations include Symetra’s Freedom Income and Guardian’s Secure Feature Income, the last two deferred income longevity annuities. The last 5 recommendations are all fixed indexed annuities. They are Great American’s Great Americas Safe Outlook, Phoenix’s Phoenix Life Personal Protection Choice, Fidelity’s Fidelity & Guaranty Life Prosperity Elite 14 Protection, Aviva’s Annexus Balance Choice Annuity 12 with 7.00% Bonus, and Forethought’s Financial Bonus Advantage.
Much more detail about all of these recommended longevity annuities can be found on Annuity FYI’s website. Speak with one of our expert advisors if you would like to know if a longevity annuity is right for your retirement planning.
Written by Rachel Summit