Tags: Seniors | Living | annuities | QLAC

Good News! Seniors Living Longer — Plan Now

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Thursday, 11 Dec 2014 09:43 AM Current | Bio | Archive

Your Biggest Risk in Retirement Could Be Your Continued Good Health.
 
Yes, you heard me right. We’ve all worried about ill health in retirement, going into a nursing home, or experiencing severe decline in quality of life. But oddly enough, a better outlook from a health perspective could pose a serious challenge on the financial front — even if you planned. Yes, the only thing standing between you and that dream retirement could be a healthy you. 
 
It sounds crazy, but don’t tune out. You see, many people plan their retirement on budgets that are in part based upon their life expectancy. Unfortunately that means the entire basis for many retirees’ planned income in retirement could be wrong. Especially if that retirement plan was made many years ago.   
 
This can get a bit tricky here, but please follow my logic. If your retirement plan is solely based upon the number found in one of the constantly changing life expectancy tables, you may be doomed from the start. Life expectancy tables are calculated based upon the date at which 50 percent of people of a particular birth year are expected to no longer be with us. Even if that number is from a recent accurate table, this means you have a 50 percent chance of being wrong if that date is what you’ve based your retirement income plans upon. 
 
But things get even more difficult when health outcomes improve and people live longer.   
 
Longevity in America is increasing. In fact, the May 2013 cover of National Geographic magazine had a photo of a baby and the headline “This Baby Will Live to Be 120.” The article documented the longevity trend and the many scientific studies and genetic puzzles that are being investigated by researchers worldwide. In short, the article made the case that a baby born today has a chance of living to the age of 120.    
 
But longevity isn’t just something that’s benefiting newborns — it’s truly starting to benefit those ready to retire today. With medical advances, better nutritional supplementation, and a greater focus on healthy living, today’s seniors are reaping their longevity benefits now. The one clear thing people of retirement age are doing at an ever increasing rate is living beyond their predicted life expectancy. 
 
Unfortunately, many are also living long enough to run out of their own savings in retirement. This is putting many seniors in the uncomfortable position of being dependent upon family and government resources for their needs later in retirement.
 
Today, there’s a 13.7 percent increase in parents moving in with adult children. That’s a loss of independence that most retirees don’t savor, and yet it’s a trend being driven upward in large part because of the difficulty in financing for longevity. 
 
If you saved for 15 years in retirement and you’re now living 20 or 25 years in retirement, that five- to 10-year difference is something you alone can’t easily plan for. But there’s a great solution to the looming longevity crisis. Retirees need not shoulder all of the risk of longevity themselves.
 
Insurance companies allow seniors to pool their longevity risks through contracts called annuities. These contracts are a great way to generate a guaranteed lifelong income no matter how long you live. Many annuity contracts have an optional feature called a Guaranteed Lifetime Withdrawal Benefit that allows you to shift the risk of longevity over to an insurance company. This means that you can get a predictable amount of income each month from your contract no matter how long you live. 
 
Recently the U.S. Treasury was investigating the looming longevity crisis and their suggested solution was to allow for a new type of insurance company contract called a Qualified Longevity Annuity Contract (QLAC). The IRS worked with the Treasury to give these contracts special treatment. The new regulations allow a participant in an IRA, 401(k) or similar plan to use as much as 25 percent (capped at $125,000) of their account balance to purchase a QLAC.    
 
Unlike many investment vehicles where the IRS requires you to start taking a required minimum distribution no later than age 70½, a QLAC allows you to start taking income as late as age 85. Since longevity annuities are designed to generate an income stream for life, this makes QLACs particularly well suited to addressing longevity risk issues.
 
Learn more about these important insurance company contracts called annuities when you get Crown Atlantic’s Annuity Primer. Visit CrownAtlantic.com/Protect to get a copy today. Also, if you’d like to meet with a Crown Atlantic specialist to review solutions that can guarantee you income no matter how long you live, give us a call at 855-221-5546.
 
Joe Stark is the CEO of Crown Atlantic Insurance, LLC in Boca Raton, Fla. Stark is an insurance industry veteran with more than 25 years of experience. For more of his reports, Go Here Now.
 
 

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JoeStark
Your Biggest Risk in Retirement Could Be Your Continued Good Health.
Seniors, Living, annuities, QLAC
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2014-43-11
Thursday, 11 Dec 2014 09:43 AM
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