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Jim Lentini: Longevity, annuities and long-term care


Posted: February 15, 2010 10:24 p.m.
Updated: February 16, 2010 4:55 a.m.
“Nothing is certain but death and taxes,”
— Benjamin Franklin

That was in the 18th century. The 21st century adaptation might be: “Nothing is certain but longevity and taxes.”

Longevity is a known financial risk and its importance will grow year after year. Why?

Because retirement planning ends with addressing income needs only through average life expectancy, which is about age 85 for males and age 87 for females who currently are age 65.

In fact, statistics two years ago stated that of a non-smoking couple aged 65, likely one will still be living at age 92. Longevity, or living longer, has created problems with Social Security, Medicare, government pension plans and many other factors of our social economic society.

Because of longevity, there is significant and growing probability of living to age 90, 95, 100 or more.

When planning for the future, you need to recognize the possibility of a very long life and the uncertainty of how long that might be.

Life expectancy for annuitants has proven to be higher than the ages commonly known.

First, annuitants are healthier than the general population because annuities are generally purchased by individuals with above-average health who figure they will gain the most advantage from an annuity purchase.

Additionally, annuities have riders that can help ensure that the unknown longevity can be insured by guaranteed planned income that cannot be outlived.

This is a planning tool for the private sector similar to the guarantees that are provided in government pension plans. These factors also contribute to the reason annuitants live longer. They have peace of mind that they will not outlive their income provided by their annuities.

Another factor of certain annuities is increasing your lifetime income benefit, should you require long-term care benefits. In your retirement planning, you can provide for long-term care insurance protection if you select a rider that provides for increased income should you satisfy the requirements to trigger the benefit.

A stand-alone long-term care policy can be expensive the older you are, as they are priced similar to life insurance.

The older you are, the more costly the premium. If you are interested in an LTC benefit, the cost may be much less expensive, if you decide to include the rider in your annuity plan. And, the rider cost in an annuity that includes the LTC benefit is not age-sensitive if you are old enough to have the rider added to your annuity.

Annuities, by definition, are a retirement-planning vehicle and differ by company, structure and type. That is why only a few of the larger quality companies can provide the lifetime guarantees and the special riders that offer long-term care benefits.

As is always recommended, confer with your financial advisor to see if an annuity and the different riders, costs and benefits should be considered as part of your future retirement planning.

Jim Lentini, CLU, ChFC, IAR is president of Lentini Insurance & Investments, Inc. His column reflects his own views and not necessarily those of The Signal.


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