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Life Health > Life Insurance

Get Ready for the Longevity Insurance Wave

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Retirement-age clients are increasingly interested in just one thing: making sure they don’t outlive their income. This is the last of a series of articles presenting helpful information on providing just that with a do-it-yourself pension–better known as an income annuity.

It’s called the “advanced-life delayed annuity,” and you’re sure to get plenty of questions about it in the coming years from clients who will have heard it called by its more familiar name — longevity insurance.

With 40 percent of American women living to age 95 — and 85 percent of American men making it to age 85 — it’s little wonder that retirees are having second thoughts about taking that trip to Disneyland with their grandkids or moving forward on their kitchen renovation project. Why? Because many find themselves worrying that they might need that money for daily living expenses another 20 years from now.

But there’s absolutely no reason for retirees to put their dreams on hold. As more and more of your clients hear about longevity insurance, more clients may ask, “Why the buzz?”

Longevity insurance is a way for your clients to stop worrying about making their money last through a long retirement and start scheduling guaranteed income to begin later in life, for just a fraction of their nest egg.

How longevity insurance works

Longevity insurance might be just the thing for your clients who:

  • Expect to live a long life
  • Want to make time work for them by buying future income at today’s prices
  • Want the freedom to spend money now, in their active years, without wondering if they’ll have income later

Say your client is a 68-year-old woman with a $500,000 nest egg. Instead of devoting 35 percent of her assets to an immediate-payout annuity, you could use a much smaller portion — such as 10 percent — to buy longevity insurance in the form of a single-premium deferred payout annuity that would begin paying guaranteed lifetime income at age 85.

The longer deferral period usually generates a much higher income payout. In this case, your client would receive $1,562 per month.

That leaves her with $450,000 for other investments — or that trip to Disneyland with her grandkids and the new kitchen.

Not only is longevity insurance one of the most cost-effective ways to buy guaranteed lifetime income, it also gives your clients a concrete timeframe for managing the assets they keep. Your clients have the freedom of knowing that they will have income that will generate for them on a future day of their choice without worrying that they will outlive their savings.

Laura Hahn is managing director of the Annuity Center for The Mareting Alliance (TMA). She can be reached at 314-275-8713 or [email protected].


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