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What is a Longevity Annuity?

We just recently talked about the immediate annuity, which is good for retirees who want to begin collecting payments immediately.  But there is a risk associated with this type of annuity that means you could possibly outlive your payments and be stuck without money to pay the bills or support your lifestyle.

This is where the longevity annuity comes into play.  What is a longevity annuity?   A longevity annuity is meant to protect you from the risk of the immediate annuity, which is outliving your payments.  You may find sources that refer to this as an advanced life delayed annuity.

The key to this longevity annuity is that you cannot receive a payout until you reach the age of eighty.  Once you reach this age, you are guaranteed payouts until you pass.  Payments will be regular and promised for the entirety of your days.  This is great for those without a social support or family system that can help shoulder the responsibility.

The Purpose of the Longevity Annuity

what is a longevity annuityThis type of annuity is not the kind you would invest in for retirement.  This is a post-retirement, supplemental investment.  It has been suggested by other retirement guides that you should invest anywhere from ten to twenty percent of your retirement savings into a longevity annuity to ensure you will provide for yourself in the last of days.

It is important to understand that this is a deferred annuity.  You are making a payment and not collecting on it for a long time.  This means you will receive interest payments to be added to the investment until you being receiving your payout.

Here is a problem with the longevity annuity, though.  If you don’t time it correctly and you die before you collect your money, you don’t get your money, and there is no beneficiary.  You simply lose the money to the investment company.

Think carefully before purchasing this annuity.  It can be tricky to time correctly and not simply be giving away money.  Again, this is a post-retirement investment plan.  Do not go into this thinking this is your main protection in retirement.

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