Worried about living a life of poverty during your golden years? Longevity insurance is a little-known policy that could prevent that.
Longevity insurance offers a solution for retirees
The number of people living past their 100th birthday is growing. 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.
That’s where a longevity insurance policy comes in…
What you need to know about longevity insurance
- Doesn’t pay a living benefit until you hit 85
- You buy coverage in $100,000 increments
- One of the rare kind of annuities money expert Clark Howard actually likes
- Trying shopping for this policy at retirement through BluePrintIncome.com
It’s the insurance policy that insurance agents don’t want you to know about!
Longevity insurance 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,” Clark says. “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, which are actually a kind of deferred annuity. 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.
(Editor’s note: Longevity insurance and immediate annuities are the only two types of annuities that Clark recommends. For more info on the latter, see our piece here.)
But here’s the thing: You won’t hear a lot of insurance agents talk about longevity policies because the commissions on them are so small.
“What happens is if you go to an insurance agent to talk to them about buying longevity insurance, they’re immediately going to try to turn you away from it,” Clark says. “They usually try to flip you into one of the types of annuities that they make massive markups on. So it’s a product that you’ve got to be active in going to find.”
And that’s where the power of the Internet comes in.
Where to shop for a longevity insurance policy
BluePrintIncome.com is an online marketplace where you can get longevity annuity quotes online. They offer quotes from a variety providers, including Guardian, New York Life, Mutual of Omaha and others.
You may also be able to work with a fee-only financial planner to purchase a longevity annuity, according to Clark.
The key is to ask them for “the insurance policy that doesn’t pay any money until age 85.” Different people call it different things, but they’ll know what you mean based on that description.
Remember, a longevity insurance policy is a form of a life annuity — which is the kind that Clark actually likes. People tend to buy them in $100,000 increments. And 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 of poverty if you don’t have to.