Longevity risk is truly one of the biggest issues facing the world today. Fewer people are being born around the world at the same time as people are living longer than ever before. The risk that comes with these long lifespans is that we haven’t saved enough for retirement and far too many people are simply running out of money. Kim O’Brien of Americans for Annuity Protection recently wrote a commentary for Insurance News Net about this important issue. In “Longevity Risk and the Annuity Answer,” O’Brien says that we are facing a “global longevity revolution” that will change the world more-so than both the technology and industrial revolutions. That’s a big deal and something that far too many people are taking for granted.
Someone retires in America every nine seconds and the majority of those people are filing for their Social Security benefits immediately, if they haven’t already. Our system is taking in less money, but is expected to pay out more in benefits as slews of Baby Boomers retire daily. People are living longer and have to pay more in healthcare costs and taxes, while interest rates remain low and Social Security benefits get cut. The bankruptcy rate has increased dramatically for those over 65 since 1991 and skyrocketed for those over age 75. Retirees are reaching the point in their lives when they hoped to relax and enjoy themselves, but instead many are facing a serious financial crisis. They are too old to work in many cases and haven’t saved nearly enough to finance their retirement. This is a crisis that must be addressed by the United States and much of the entire world.
The solution is to have a lifetime stream of income that will not be affected by tumultuous markets. We all remember everyone who lost their savings when the markets tanked over the past few decades. Annuities allow you to accumulate savings, keep your money protected, and provide guaranteed lifetime income. Aside from Social Security and pensions, annuities are the only products that can guarantee you lifetime income. They also protect you in the case of severe market volatility. People who own annuity products are confident in their retirement security and have much less financial anxiety than those without the guaranteed income from an annuity. Dr. Robert Merton’s recent Harvard Business Review article, “The Crisis in Retirement Planning,” says that Americans approach retirement planning all wrong. We tend to focus on net worth and savings rather than income. He also says that investments cannot deliver income security. That’s where annuity products, and fixed annuities in particular, come into play. Fixed annuities eliminate longevity risk with their benefits of market protection and guaranteed lifetime income. Speak with an expert if you have any questions about using an annuity product to alleviate the anxiety that longevity risk causes.
Written by Rachel Summit