What Is A Longevity Annuity?
Longevity annuities (aka. Deferred Income Annuities) are contracts between an individual and an insurance company. The insured party deposits a premium payment into the contract today and in exchange, receives a guaranteed income stream for life beginning at a pre-determined future date.
The income stream will be based upon the premium deposited, the age of the contract owner, their life expectancy, and the date/time frame in which the income will be paid. Market fluctuations will not impact the income payments received. In some cases, contract owners will be permitted to make additional contributions to their annuities. These additional payments will impact the income received.
If you'd like to see a longevity annuity calculation, simply enter your age, income start date, and amount to invest, in our Longevity Annuity Quote Calculator, and click the Get My Quote button. Your quote will appear instantly on the next page.
Longevity Annuities vs. Immediate Annuities
In most cases, the income payout will be significantly higher with a longevity annuity than with an immediate annuity. There are two commonplace situations future retirees consider with regard to these 2 annuity options. The first option involves placing capital into a longevity annuity, deferring payments for 20 years. The second situation involves waiting until the retiree’s later years to deposit funds into an immediate annuity. If the retiree invested $100,000 in either scenario, they would receive more income from placing premium into a longevity annuity and waiting 20 year to begin receiving it.
Longevity Annuity Optional Benefits
In most cases, premiums deposited into longevity annuities are forfeited in exchange for future income. One of the concerns many retirees have with this annuity product is how their asset or income stream will pass to their named beneficiaries. To address this concern, many annuities offer an optional death benefit rider. This rider provides the option for a return of premium of the remaining income stream to named beneficiaries if the contract owner dies within a specified period of time.
Another optional rider offers inflation protection, increasing the guaranteed income payments by a fixed percentage to protect the retiree’s ongoing earning power.
Optional riders are available for an additional fee, which reduces the income payments received from premiums deposited.
Longevity annuities offer investors guaranteed income for life in addition to higher payouts than other contract types. Longevity annuities are strong options for those who are concerned that they may outlive their assets.
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Comments (10)
Philip
2015-06-24 10:34:20
My wife and I are in our 50s. I was wondering if we can buy a longevity annuity that would start paying when the first of us dies and go on paying until the second person dies. I know we could each buy a longevity annuity which pays if each of us is alive. But we won't need the annuity income when we are both alive. So I really want the income to start after one of us has died.
Hersh Stern (ImmediateAnnuities.com)
2015-06-24 10:38:48
Hi Philip,
First, it's important to know that no insurance company sells an annuity which automatically begins monthly payments to your survivor on your death. However, there are insurance and annuity products that can approximately accomplish what you have in mind.
You could purchase two life insurance policies and make each of you the beneficiary of the other's policy. The survivor would receive a lump sum which he or she could invest in an immediate annuity at that time. The remaining policy on the life of the survivor could be canceled or maintained to provide a legacy to your children or other beneficiaries.
You can also buy a joint life longevity annuity that would begin making payments at a date you selected ahead of time and continue to pay this amount until the last spouse dies. But, here, the start date would have to be selected years ahead so it won't coincide with your or your wife's death.
You could also buy two deferred MYGA or index annuities which would grow interest for many years. Then on the first death, both contracts would be converted into two lifetime income streams based on the age of the survivor.
You can read more about deferred MYGAs here:
https://www.immediateannuities.com/deferred-annuities/
And you can read more about fixed index annuities here:
https://www.immediateannuities.com/fixed-index-annuities/
-Hersh
John
2016-01-11 08:19:07
My wife is 19yrs younger than me. I'm wondering if it's possible to purchase a deferred annuity for her with my 401k.
Hersh Stern (ImmediateAnnuities.com)
2016-01-11 08:20:17
Hi John-
You cannot use your IRA or 401k money to buy any annuity which covers only your wife's life expectancy (i.e., where she is the sole annuitant). The type of annuity doesn't matter (e.g., immediate annuity, multiyear annuity, deferred income annuity, longevity annuity, or index annuity). The I.R.S. prohibits anyone from using their own IRA/401k account to set up an annuity that solely benefits another person.
However, you can certainly buy a joint life annuity with yourself as the primary annuitant and your wife as the secondary annuitant using your IRA/401k money. And since your wife is 19 years younger than you, the income you'd receive from a joint life annuity would be very close to the amount you'd get from a single life annuity which only covered your wife. So, in the end, you can accomplish what you had in mind by purchasing a joint life annuity.
-Hersh
Salvatore
2019-04-18 11:13:15
where do I go to buy a qualified longevity annuity contract funded by IRA money?
Hersh Stern (ImmediateAnnuities.com)
2019-04-18 11:14:05
We are a brokerage, so we can help you with the purchase of your QLAC. It looks like we sent you QLAC quotes. If you have questions, or if you would like to proceed with an application, please call me on our toll-free number, (800) 872-6684. I'll be very happy to help in any way that I can.
-Hersh
Richard
2019-09-23 08:41:11
I am wondering what the minimum age is to invest in an immediate annuity? Must I be 59 1/2 to buy or can I invest earlier?
Hersh Stern (ImmediateAnnuities.com)
2019-09-23 08:41:59
Hi Richard,
There is no minimum age to purchase an immediate annuity, although some companies require the owner be at least 18.
-Hersh
Emerson W.
2022-11-13 13:58:59
Can a 1035 exchange be done from a myga to an immediate annuity ?
Kyle
2022-11-14 08:44:25
Hi Emerson,
Yes, absolutely. We handle these types of applications quite often.
Please feel free to call us on our toll-free number, (800) 872-6684, if you require assistance. We would be happy to help you with your 1035-exchange to an immediate annuity.
Best regards,
Kyle