What is Longevity Insurance and How Does It Work?

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Longevity insurance is a relatively new type of insurance that has gained popularity in recent years. But what is it, and how does it work? In this guide, we will answer those questions and more! A longevity insurance policy is designed to provide you with financial security if you outlive your life expectancy. Therefore, it can be a valuable tool for anyone who wants to ensure enough money to live on even if they live longer than expected.

What is Longevity Insurance?

Longevity insurance is a type of annuity designed to provide income in later stages of life, typically starting at an advanced age, such as 80 or 85. This financial product helps to mitigate the risk of outliving your savings, a concern known as longevity risk.

The type of longevity annuity used for qualified retirement accounts (401k, IRA, 403b,457,TSP) is called a Qualified Longevity Annuity Contract (QLAC). A QLAC is an insurance policy that allows you to set aside money for retirement to delay RMDs while still receiving the benefits of tax-deferred growth. The money in your QLAC can then be used to purchase an annuity that will provide you with income for life.

How Does Longevity Insurance Work?

  1. Initial Investment: You make a one-time payment to an insurance company, often when you’re in your 50s or 60s.
  2. Deferred Payouts: The insurance company agrees to start paying you a regular income at a specified future age, for example, 85.
  3. Lifetime Income: Once the payouts begin, they continue for the rest of your life, providing a steady income stream in your advanced years.

Examples

  • Example 1: A 60-year-old invests $100,000 in longevity insurance. At age 85, they start receiving $1,000 per month for life.
  • Example 2: A 65-year-old invests $50,000. If they live to 80, they will receive $500 monthly thereafter.
Longevity Annuity

Why Would I Want Longevity Insurance?

Longevity insurance can be a valuable tool for anyone who wants to ensure that they have enough money to live on even if they live longer than expected. It can also be used to hedge against the risk of outliving your retirement savings.

Is longevity annuities a good idea?

Longevity annuities can be a good idea for people who want to ensure they have enough money to live on in retirement, especially if they are worried about outliving their savings. However, it is essential to remember that longevity annuities are not suitable for everyone.

Longevity Insurance

What are the benefits of longevity annuities?

Some of the benefits of longevity annuities include:

  • In addition, you can use them to supplement your other retirement income sources such as Social Security or a pension.
  • They can provide you with a stream of income that you cannot outlive.
  • They can help to hedge against inflation.
  • They offer tax advantages, as the money you use to purchase the annuity grows tax-deferred.
Special Longevity Annuity

What are some of the drawbacks of longevity annuities?

Some of the drawbacks of longevity annuities include:

  • You may not need the income if you do not live as long as expected.
  • The income from a longevity annuity is often not as high as other retirement income sources such as a 401k or IRA.
  • You may have to pay taxes on the money you use to purchase the annuity when you withdraw it in retirement.
  • Finally, you may not be able to access the money you use to purchase the annuity until you reach a certain age, such as 85.
What Is A Longevity Annuity

Is Longevity Insurance Right for Me?

Longevity insurance may be right for you if you are looking for a way to provide financial security in retirement. It can also be a good option if you are concerned about outliving your retirement savings. However, it is essential to remember that longevity insurance is not suitable for everyone. You should contact us to see if it is right for you.

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Frequently Asked Questions

How Much Does Longevity Insurance Cost?

The cost of longevity insurance will vary depending on several factors, including your age, health, and the size of the policy you purchase. However, it is generally much cheaper than traditional life insurance.

Who has the best longevity insurance?

The best longevity insurance company will depend on your individual needs and circumstances. However, some of the top companies offering this type of insurance include AIG, Integrity, and Principal.

What is the best way to get longevity insurance?

The best way to get longevity insurance is to contact an independent insurance agent or broker (like The Annuity Expert) and ask about QLACs. You can also find many companies that offer this type of insurance online.

When should I buy longevity insurance?

The best time to buy longevity insurance is before you retire. The older you are, the higher your premiums will be. However, you can still purchase a policy even if you are already retired.

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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