|An Introduction to Longevity Annuities.
A Longevity Annuity is a form of longevity insurance, sometimes referred to as a “deferred payout” annuity. The annuity is purchased with a deferred payment start date, typically 10 to 20 years in the future. The long deferral period allows for a lower up front purchase payment to attain the same annuity payment as a traditional immediate annuity. Most longevity insurance products have limited access to funds during the deferral period.
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|Benefits of a Longevity Annuity:|
- Enables clients to use a small portion of current savings to buy guaranteed income for their later years of retirement
- Clients can buy future income at today’s prices with a small portion of their retirement savings — as little as 10 to 15%. Capturing today’s pricing is particularly valuable because the future cost of income annuities will increase if average life spans continue to lengthen
- Allows clients to choose a future date, typically 10 to 20 years, to begin collecting income based on their family history and their unique financial needs
- Because they are insured against outliving their retirement savings, clients have more flexibility with their portfolio investments than they might with other income options.
- Includes several optional features including a death benefit, an annual payment increase to help counter the effects of inflation, and an installment refund.
Who is an ideal client for Longevity Annuity?
- Clients who are nearing, or recently begun retirement
- Clients generally in good health
- Those that wish tosecure future income to protect against outliving their retirement savings
What is the payment start date?
The payment start date is elected at purchase and is the future date that annuity
payments will begin.
- The earliest payment start date is 13 months after purchase.
- The latest payment start date is age 95 for contracts purchased with non-qualifiedfunds and 70½ for contracts purchased with qualified funds.
What happens if the owner dies prior to the payment start date?
At purchase, the owner has the option to purchase a death benefit that would provide the greater of:
- 90% of the purchase payment compounded at 3% per contract year or,
- 100% of the purchase payment
If the owner has not elected the optional death benefit, then no death benefit orannuity payments will be paid. Additionally, no premium will be returned and the contract is terminated.
What happens if the owner dies after payments begin?
All remaining guaranteed benefit payments, if elected at purchase in the form of an installment refund or guaranteed period, will continue to the beneficiary in the same manner payments were being made.