Longevity Planning and Annuities Explained
Life expectancies that go beyond the average couple of decades virtually require the senior or near-retiree of today to think about longevity planning, and have the benefits of products such as annuities explained. Longevity planning with annuities and other investments has become in demand, especially as statistics from national studies show that people who reach the retirement age of 65 may be able to live up to 83 and beyond.
Planning Your Finances around a Longer Life
To be able to live comfortably in the latter part of your retirement (your 80s and after), you will need to budget your money well and live sparingly from normal retirement age to your 70s. What some professional investment advisors call the sustainable withdrawal rate (around 4%), which is the percentage that is assumed to make your nest egg last for three decades or so, can be sustained with longevity planning tools like the annuity. Overall, lifetime annuities can give you larger returns, although the downside is the considerable expense of buying into these kinds of annuities.
How Longevity Insurance Annuities Work
The insurance industry has come up with an annuity that is also known as longevity insurance to address the issue of longer life spans and relatively small nest eggs. This kind of insurance works much like other annuities, in that your payment/s as an investor is/are held in sub-accounts or investments that generate gains. Typically recommended for people to purchase in their 60s to withdraw from after a couple of decades, these allow you to receive periodic income of significant amounts monthly, up until you pass on.
Longevity Annuity Considerations
While some industry pros say that these can be a good way of funding longer life spans, the pricing of these annuities may not be viable for the average client due to the possible effects of inflation. Expected rates of return, others say, are far lower what is advertised due to the proportional likelihood of the investor collecting the said rates.
The lack of a feature like the COLA or Cost of Living Adjustment should also push potential buyers into serious consideration before signing up for longevity insurance. People who buy these annuities should think about the lack of adjustments to cope with inflation, the state of their health when they finally get around to collecting their payouts, as well as their own financial and personal circumstances. Prior to buying longevity insurance, consult with a qualified investment professional and have these kinds of annuities explained.
About the Author:
Katherine Smith is an author who specializes in financial topics concerning seniors. Puritan Financial Group provides information to retirees who need annuities explained, in addition to investment options that can help them build bigger and stronger nest eggs. For more info on how Puritan Financial Group can help you, please visit our website at http://www.puritanlife.com
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