Longevity annuities: Why clients should consider them

May 30, 2023

By Dave Strausfeld, J.D

Frank and Jenna, both 65 and in good health, have roughly $2 million saved for retirement, but Frank is reluctant to take the extended European vacation they had long promised themselves. "What if we live into our 90s and the markets tank?" he says. "We might run out of money." Perplexed by his hesitation about spending, Jenna suggests they speak with their CPA financial planner, who explains that one option would be to buy a longevity annuity.

After further consultations, they take 10% ($200,000) of their retirement nest egg and purchase an annuity that will pay $65,000 each year beginning when they reach age 85 for as long as either of them is alive. "That helps Frank rest easier about spending," Jenna says.

Longevity annuities are a type of annuity that will "kick in if you're still alive at a given age to ensure that no matter what's happened in your portfolio, you have some amount of money to live," said David Blanchett, Ph.D., who heads retirement research at PGIM DC Solutions, the global investment management business of Prudential Financial Inc.

Read the full article on www.journalofaccountancy.com.

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