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Should You Buy Longevity Insurance? |
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Longevity Insurance is relatively new annuity product that begins paying income once you reach a predetermined age between 70 to 85. According to the Business Week article "More Dollars Later In Life" a 65-year old man who pays $250,000 into a longevity policy, could expect an annual income of $210,000 at age 85.
The Social Security Administration claims that the average lifespan of today’s 65-year old male is around 81 years and Forbes claims that that same male has a 50% chance of living to age 85. In other words, there’s a 50% chance that this person won’t live long enough to collect the first payment and a 50% change that this person will live long enough to collect their first payment. That is better than the odds of betting in Las Vegas and you can still claim beneficiaries on your longevity policy at a lower payout rate in the future.
Of course there is an alternative to longevity insurance but it isn’t without its own risks. You could for example invest in the S&P 500 Index for 20 years and you get an average return of 7.27%. And, if you died before you reached age 85, your beneficiaries would inherit whatever balance you had in your account.
With the average life span consistantly increasing and the improvements in healthcare longevity insurance seems to be a great annuity to invest in.
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