lifetime income | Annuities

Poor Health Can Be a Factor in Producing More Retirement Income

There’s a type of annuity that pays you more if your health profile is not good. This may sound strange, but here’s how it works: SPIA, which stands for Single Premium Immediate Annuity (also referred to as health adjusted immediate annuity), has long been a popular investment for obtaining a fixed income which cannot be outlived (income for life). With the income for life option, the issuing insurance company calculates the size of your monthly payment based on standard life expectancy tables, based on an analysis of your health. Once calculated at the beginning, you continue to receive the same monthly amount, regardless of how long you live. It’s almost like getting a second social security check. companies take into account your individual health condition and use that information to calculate your life expectancy. If your health records indicate conditions that could lower your life expectancy, this is factored into the monthly payment you receive and increases the monthly payment. You then receive this fixed monthly amount no matter how long you live.| Take this hypothetical example. A man age 70 decides to obtain a SPIA. He deposits a $100,000 premium and based on his standard life expectancy of 16 years, his [...]

Will you Outlive Your Money?

Could underestimating your longevity mean you’ll run out of retirement money? At age 65, the average life expectancy is 81.8 years for a man and 84.8 years for a woman. At age 75, the average life expectancy is 85.5 years for a man and 87.6 years for a woman. Note that as you grow older, you’re expcted to live longer! With recent advances in medical science, it’s no longer a stretch to think that you could live to be 100. In fact, the US Census Bureau projects that by 2050 there will be nearly one million centenarians. No one wants to die sooner, so that’s great news. The problem: If your retirement plan doesn’t recognize the possibility of a long retirement, then you could potentially outlive your money. But read on for a solution. Consider the following hypothetical example. Assume you’re 64 years old and earn $60,000 per year. You plan to retire next year at age 65. You’ve accumulated $1,000,000 in retirement savings, which you think will return a hypothetical six percent per year throughout your retirement. And, you have a $60,000 annual retirement need (excluding Social Security). If you have a 15-year retirement from ages 65 to 80, [...]