A longevity annuity provides protection against outliving your money late in life. Also known as an advanced life delayed annuity, this type of annuity requires you to wait until you reach age 80 or so to begin receiving a payout. Once the payout begins, the annuity provides a guaranteed, regular amount of income for the rest of your life.
These are usually used as a supplemental retirement investment. You typically would invest just a portion of your retirement nest egg in a longevity annuity – say, 10% to 25% – and leave the rest in your other retirement accounts.
As with any deferred annuity, your money in a longevity annuity grows until you start receiving payouts. The later you choose to begin your payments, the larger your payments will be.
Longevity insurance is just a type of deferred annuity; but recasting the product as insurance has advantages.
Who wants to live off Social Security for 15 years if they make it to 100? For those who are worried that they’ll pay the premium and never receive a single payment , longevity insurance policies typically offer a rider that guarantees a return of principal or continued annuity payments to the annuitant’s beneficiaries.
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