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Those Who Most Need Longevity Annuities Not Buying Them


Newsroom America just published an article about a new study performed by The University of Missouri’s assistant professor of personal financial planning, Michael Guillemette. In “Seniors Less Likely to Buy Longevity Insurance Despite Value, Study Says,” we learn that the people who most need longevity insurance aren’t necessarily the ones protecting their future with this insurance. As the risk of running out of money in retirement because of increasing longevity increases, Americans must take a closer look at insurance products that will keep them from running out of money.

Annuities are one of the only products that protect you from outliving your savings as your years creep up there. A newer type of annuity product, called a longevity annuity, has been promoted by the federal government for the past couple of years for it’s inherent benefits. Longevity annuities, also called longevity insurance, ensure that seniors will never run out of money because of their guaranteed lifetime payouts. These payments start late in life, sometimes as late as age 80-85. Payments are much higher with a longevity annuity than they would be with a traditional immediate annuity because the former are bought earlier in life with a lump sum payment and the money stays with your insurer until payments begin when you are older.

Guillemette’s study was co-authored by three other college professors and published in the Geneva Papers on Risk and Insurance-Issues and Practice. “Determinants of the Stated Probability of Purchase for Longevity Insurance” looked at who is the most likely to buy a longevity annuity and compared it with who is actually buying these products. The purpose was for financial advisors to know who would and would not benefit from longevity insurance so that these important products are purchased by the right people. By researching demographics, they found that young women, people with high risk tolerance, and those who do not have a lot of equity in their homes are the most likely to buy a longevity annuity product. These groups are not necessarily those who most need this type of insurance the most.

One of the biggest qualifications for needing a longevity annuity is that you are healthy and have a strong family history of long lifespans. Older Americans nearing retirement who are in good health should seriously consider buying a longevity annuity to make sure that they never run their retirement savings dry. These products are also beneficial to seniors with lower risk tolerance because they will have no concern about where their money is in the future. It’s important for financial advisors to know which people would benefit from longevity annuities so that they can help them meet their goals. It’s also important to know who might not need this type of insurance. Longevity annuities are an important tool to guarantee lifetime income for seniors, but it’s important to match these products with the people who most need them.

Written by Rachel Summit

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

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