Is a Longevity Annuity a Good Guaranteed Retirement Savings Strategy for You? 

It’s hard to know exactly which type of retirement vehicle makes sense for your needs. (I used to work in higher education, and believe me, they pushed annuities hard.) 

However, if you worry about running out of money in retirement, you may want to consider a longevity annuity. Let’s explore whether you should tap into this option.

When you buy a longevity annuity, you put forth a lump-sum premium in exchange for a future monthly paycheck. This monthly paycheck continues for as long as you live. Put simply, a longevity annuity turns your assets into guaranteed income for life — it offers you the option of not outliving what you’ve saved for retirement. 

Your insurance company may also give you money for a certain period of time instead of your whole life — you’ll need to learn the fine print by peeking into all the details with your insurance company. The size of your payout depends on your premium amount, age and gender.

A longevity annuity will pay out years after you pay the premium. During what’s known as the deferral period, the insurance company invests your money. 

Take a look at the different types of longevity annuities below: 

Take a look at the pros and cons of longevity annuities.

It’s nerve-wracking to land on the right kind of retirement savings because, let’s face it, that’s what you have to live off of for the rest of your life! Let’s start with the reasons you may want to get a longevity annuity. A longevity annuity:

Naturally, you’ll face some cons that affect choosing longevity annuities. Let’s take a look at the cons: 

So, should you tap into longevity annuities? You have to answer that question for yourself.

You may want to get one if you: 

However, you only have to look as far as the cons to determine whether a longevity annuity will work for you. Just knowing that you have the potential to lose funds (income doesn’t go to your heirs like it would with a retirement fund) and you can’t invest like you may want to. You also can’t access money tied up in an annuity. You’ll also really have to make sure that you trust your insurance company — only choose reputable companies!

Once you weigh the pros and cons against your specific situation and your current assets, you can make a decision about whether you need a longevity annuity.

You may also need to heavily consider that you run the risk of never tapping into the longevity annuity at all. In other words, if you die before the payouts start, you may not receive any money at all. For example, let’s say you die at 78 and the payouts had meant to start at age 80. You won’t get any money at all. 

Also, longevity annuities are complicated. You need to consider a million things before you get them: whether you need a joint-life version, a cash refund version or even a joint-life version with a cash refund. It’s a good idea to thoroughly read everything you can about the longevity annuity you’re considering. Call the insurance company if you have questions and make sure you understand which type of product works best for you.

Before you make a final decision, make sure you have a savings account built up specifically for emergencies. You may even want to have a conversation with your doctor about your life expectancy. If you have health issues, a longevity annuity may not be right for you.

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