Longevity Annuity

By: Craig E. Hemke

President and founder of BuyaPension.com

As Americans struggle with the complex challenges of planning for retirement income, increasingly turning to single premium immediate annuities or SPIAs to help manage the risk of outliving their retirement assets. SPIA sales have been relatively stable for years, however, sales have recently increased at an annual rate of 25-30%, reaching $ 2.4 billion in 2008. This demand growth is likely to continue in the foreseeable future. Currently, most Americans are familiar with the risks inherent in investing. The market risk, inflation risk, the risk of interest rates and others are all elements that investors are accustomed to managing. These risks are always present to investors in retirement, but they are joined by a new risk, longevity risk, which is the possibility that you could survive your assets.

An investment in a SPIA is one of the few times an investor can take to manage this risk. Longevity risk is often misunderstood. Although many have read articles and studies on life expectancy, longevity is something completely different. Life expectancy is defined by the life expectancy of someone born today. This lifetime is often limited by childhood diseases, illnesses and accidents.

Longevity is defined as the average lifespan of a person who has already survived to age 65 years and has a lifetime much expected. In fact, the current actuarial tables indicate that health couple 65 has a 50% probability that a person will survive all the way to 92 years. There is even a 25% chance that one person, it will be 97! Stocks, bonds and certificates of deposit are all tools of investment for the average retiree, but none of these investments can really guarantee income for 30-40 years of retirement. However, an immediate annuity can.

How does an immediate annuity? In one exchange, investment capital or the payment of premiums, an insurance company to guarantee an investor a fixed income payment for life. Like a defined benefit or pension, the income is stable, predictable and guaranteed by the insurance company to continue throughout the life of the investor. Payment frequency is determined by the investor as well, and payments can be received monthly, quarterly or annually. The investor may also decide the level of protection of profit that they would like.

These options include: single life or joint life. With this option, payments are guaranteed to the investor for as long as they live and their spouses. However, once the surviving spouse dies, the cessation of payments of income and nothing is paid to beneficiaries. The life or life with period certain: This option also guarantees a lifetime income, but it includes some protection beneficiary. Say, for example, an investor buys a life with a contract period of 20 years and some of the investor and his spouse both pass after only receiving 10 years of income. In this case, the beneficiaries will receive the contract said the last 10 years of guaranteed income, thus fulfilling the contract income component of 20 years.

Life or living together with Cash Refund: This option guarantees a lifetime income, too, but comes with a different form of the protection of beneficiaries. In this example, let's say the investor buys a life together with Cash Refund $ 200,000 contract. Then the couple go right after receiving $ 50,000 in income. With this contract, the i.