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Who Worries About Running out of Money Later In Retirement?

Are you worried about running out of retirement savings later in retirement? If so, you are not alone and also have plenty of company. According to a recent AARP survey of baby boomers, respondents said they had more concerns about running out of money during retirement than concerns about getting sick and dying!

While these results might be shocking, they really should surprise us. Consider some statistics from the Social Security Administration about life expectancy:

  • If you are a man turning 65 today, you can expect to live to 84 on average, and if you are a woman turning 65 today, you can expect to enjoy your 86th birthday.
  • About a quarter of 65-year-old Americans can expect to live past 90, and one out of ten will survive past 95.
  • Average life expectancies are increasing, and the longer people live, the longer they can expect to live. If you are either older or younger than this, you might expect to live even longer.

The Deferred Retirement Annuity: Protection Against Outliving Retirement Savings

Enjoying a long life is a positive thing, but there is no question that planning for a long retirement that could last almost as long as a working life is difficult. This, of course, accounts for baby boomer worries about saving for retirement. Of course, there are immediate annuities that can provide lifetime incomes, but the amount of that income will depend upon life expectancy and the amount people have to invest. This is not an argument against immediate annuities, but it is an introduction to another kind of retirement annuity to consider adding to a retirement portfolio: deferred retirement annuities.

These are annuities that are purchased at retirement but not used until some years or decades have passed. Meanwhile, the money can grow according to a predetermined rate or market index to increase the asset and the amount of possible income that can get received in the future. When other retirement savings have been exhausted, this new source of retirement income just starts to kick in.

These deferred income annuities, also called longevity annuities, offer larger payouts the longer than can get deferred. These are some examples from a Kiplinger article, Good Reasons to Buy a Deferred Income Annuity:

  • An example of investing $50,000 in one New York Life product could result in yearly payments of over $17,000 if they are begun at age 80.
  • You can also purchase a different version of the annuity that guarantees your beneficiary will receive a minimum of your investment if you pass away before you have the chance to earn that original investment back in payments, but your expected income from this version would be closer to $14,000 a year.

Longevity Insurance Can Provide Income for the Second Part of Retirement

If you are worried about running out of money during retirement, and you have some money to save for the future, you can keep that money working hard even after you have retired with a longevity annuity. Instead of serving as life insurance, you can buy longevity insurance!


Source for life expectancy: http://www.ssa.gov/planners/lifeexpectancy.htm

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Informing baby boomers!