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Longevity Risk


Risky Business

Planning for retirement is risky business! No, not the Tom Cruise type of risky business - it’s just that there is a lot to consider when deciding how to lay out your retirement finances. Consider the following: Market Risk Timing Risk Withdrawal Risk Infation Deflation Risk of Death Risk of Long-Term Care Oh, and, the number one risk… Longevity Risk


Obviously, living for a long time is a wonderful thing! We want to be here for the long haul to enjoy sunsets, grandchildren, family reunions, and more, but a longer life can multiply all of the other risks… and medical technology is developing very rapidly, so many people will likely live longer than planned. Long Life = risk x risk x risk x risk If you retire at 65 but then die at age 68, it doesn't matter if the stock market falls 3,000 points. It doesn't matter if you were withdrawing 10% per year or that you forgot to buy a long-term care policy. You didn't live long enough for it to matter. However, if you live to be 85, 90 or 95 it is all of those other risks that could wipe you out. So what math and science prove, is that you have to eliminate longevity risk. The solution to Longevity Risk is guaranteed income annuities!

Lifetime Guaranteed Income

Let’s take a second to give more insight on what guaranteed income annuities are... Investopedia defines a guaranteed lifetime annuity as “a financial product that promises to pay its owner income on a regular basis for the rest of their life.”

Essentially, they are contracts sold by insurance companies that promise to pay the buyer (and their spouse or another appointed person in the case of a joint and survivor annuity) for the rest of their lives - regardless of how long they live, in exchange for an up front lump sum of money or a series of payments. You might be asking yourself, “How are the insurance companies able to make this seemingly challenging guarantee??” We’ll let you in on the secret - it’s called mortality credits. Sounds spooky but it’s basically the ability to access other people’s money. An often-touted advantage of annuities is that they offer mortality credits due to the pooling of mortality risksurvivors receive a return boost from the leftover money of those who die prematurely. It is these mortality credits that allow a lifetime income annuity to have such high guaranteed payouts. No other investment can do this. That simply means that you cannot use futures, options, hedge funds, or any other vehicle to do what the lifetime income annuities can do. The solution to Longevity Risk as we mentioned is guaranteed income annuities and here’s why: It's important to know how much money you will have each month and that it will last your entire life! Looking to explore Guaranteed Income Annuities further with us?


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Sam and Karen

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