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Buying Future Retirement Income Security In Advance?

From NY Times via Yahoo Finance:

Many people worry about outliving their income. And typically, because fewer and fewer people have a pension that they can rely on to be there when they are much older, they wonder what to do with their 401k or IRA money that will make sure they have a stable retirement income later on.

Enter Longevity Insurance! (queue triumphant music now). From the article:

“Even if you don’t live that long, the insurance removes some of the uncertainty of how much you can afford to spend in retirement. If you know you have a guaranteed stream of income that will kick in at age 85, for instance, you may be able to spend down your portfolio a little more aggressively before then. The idea is to buy enough insurance so that you’ll be able to maintain your lifestyle after the payments begin.”

What is longevity insurance? In a short answer, it is buying future income now in one lump sum. This can be a very attractive feature. The risk is obviously that you might die too young, but then you wouldn’t have a money problem would you? 🙂 What you have to prep for is running OUT of money and this product could fit the bill.

It also, as the quote mentions above, will allow you to spend your retirement money a little more at an earlier age, when you really want to enjoy it – because the insurance will cover you later on. Again from the article:

At the Hartford Financial Services Group, for instance, it would cost a 65-year-old man $18,425 to buy $1,000 in guaranteed monthly income that begins at age 85, compared to $23,272 for a woman. It would cost $33,203 to cover both partners’ lives — which is much less than the $211,000 they would need to buy an immediate annuity. The longer you wait to collect the income, the lower your premium.

Would this make sense for you? it would require some math be done.When doing financial planning for retirement,  I would also recommend seeing how this would fit into a comprehensive financial plan, not just as a add-on to a poorly planned “retirement pension plan.”

If you’d like to see how longevity insurance might or might not fit into your plan, or if you’d like to see how you might develop a strategy to make sure your retirement SAVINGS plan develops into a retirement INCOME fund, give us a call: 781.393.0021 or send us a Quick Contact. Investigate our client interview process here: Client Process – Where to Begin.

For more articles on retirement income planning, try:

Individuals Must Create Their Own Pensions – But How?

Convert Your Bond Portfolio to a Baseline Pension

Learn more about Christopher Grande, MSIM, RMA here:

About Chris


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