Longevity insurance is a smart buy at retirement

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Longevity insurance is a smart buy at retirement
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Worried about living a life of poverty during your golden years? Here’s an insurance policy that could prevent that!

Read more: 2 kinds of annuities that actually make sense for your wallet

Longevity insurance offers a solution for retirees

The number of people living past their 100th birthday is growing. So when you stop working, the great anxiety inherent in retirement planning is not knowing how much to save for later in life vs. how much you can afford to live on and spend in the early years of your retirement.

Enter the longevity insurance policy. It is a simple insurance product you buy that most people will never get the benefit of. That’s because it doesn’t start paying a living benefit until you hit 85!

The idea is that with a longevity policy in place, you could plan to blow through all the cash in your retirement plan through age 84. Because the minute you turn 85, you get a check every month for as long as you live.

Insurers offer a great benefit on longevity policies. Why? Because they know from actuarial tables that most people who buy the policy won’t live to receive any money. But if you do live to age 85, you get that nice monthly check.

You won’t hear a lot of insurance agents talk about longevity policies because the commissions on them are so small. But they can be a great idea for so many situations where people might otherwise outlive their money.

If you want to explore the idea of buying a policy, ask the agent for ‘the insurance policy that doesn’t pay any money until age 85.’ They’ll know what you mean; different people call it different things, but they’ll know what you mean based on that description.

A longevity insurance policy is kind of like a life annuity. People tend to buy either of them in $100,000 increments. The money you put down generates far more income each month than you could on your own.

The optimum time to buy longevity insurance is at the time of retirement. It could prevent you from living a life in poverty if you don’t have to. Of course, when you do buy longevity insurance, the money you use is no longer available for your heirs.

Read more: 5 scary facts about nursing home costs (and what to do about them)

Scam alert: Social Security Referendum

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Clark Howard About the author:
Clark Howard is a consumer expert whose goal is to help you keep more of the money you make. His national radio show and website show you ways to put more money in your pocket, with advice you can trust. More about Clark
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