How People Can Insure Themselves Against Outliving Assets in Retirement


In the United States, the average expected lifespan of humans keeps increasing as time passes. The average male born today can expect to live about 75 years, and a female born now can expect to live about 80 years. Research shows that people who reach the 65-year age mark are likely to surpass those life expectancy numbers. Men who are 65 can expect to live about 16 more years, and females who are the same age may expect to live about 20 more years. Research also shows that people who reach the age of 75 are likely to live past the age of 85.

Many people welcome the thought of extra years on their lives, but these added years can also bring several challenges. One important issue is for people to decide how they will support themselves financially. To ensure there will be enough money to pay the bills after leaving the full-time workforce, insurers suggest purchasing longevity coverage.

What Is Longevity Insurance?
This type of coverage is essentially an annuity that starts paying guaranteed monthly amounts at a later age. People typically pay one lump sum as the premium when they retire. However, they do not start receiving annuity payments until they turn 85. Between the time of retirement and that age threshold, they must rely on income from other sources. Some examples would be retirement savings, pensions and social security benefits.

When a person knows that he or she will have a guaranteed income source after annuity payments start, that helps relieve some of the worry of outliving retirement savings. If insurers offer this option, it is marketed as one that protects people against longevity risks or insuring their assets against the possibility of outliving retirement income. It is also possible to consider longevity coverage as a simplified form of planning for retirement income. People with this coverage know that at least part of their income will be available to them later on. The following are some important points to consider about longevity insurance:

– These types of policies’ premiums are usually paid in lump sums. If a person buys longevity insurance at the time of retirement, it is likely he or she will have to use some funds from retirement savings to buy it. People must consider whether their savings will be large enough to do this, and they must also know exactly how much they plan to put toward the purchase.

– Before receiving money back from the investment, a person must reach the annuity start date. As insurers perfect their products, many are adding death benefit features as options. This means heirs will receive something in return if the policyholder dies prior to the start date for the annuity. However, this reduces the monthly income that an initial premium payment would buy.

– Since a person is paying for something that will not be possible to use for 20 years, it is important to choose products carefully. Always work directly with an agent, and be sure to discuss all concerns prior to buying coverage.

Not all people who buy these policies will live until the age of 85, so there is no guarantee that benefits will be paid in such a situation. This should not deter possible buyers from purchasing longevity insurance, because companies offer this form of coverage for surprisingly affordable prices. For many people, this is the perfect addition to retirement income. Please call ACBI at 203-259-7580 or visit our website to learn more and to discuss whether this product is a beneficial option for personal needs.

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