March 16, 2008

Concerned about outliving your savings ?

As American’s begin to live longer from better living and the advancement of medicine, financial planners are becoming increasingly concerned that their clients will outlive their income.

Those who are looking ahead are beginning to look at ways of insuring against the possibility of outliving retirement assets. Fortunately, there is a solution offered by life insurance institutions in the form of a “life annuity".

In its simplest form, a life annuity pays income to an annuitant for as long as he/she survives. By Purchasing a life annuity, the annuitant converts some portion of a retirement or real estate portfolio into the maximum guaranteed lifetime income he can receive while insuring against the contingency that he will outlive his financial resources. Other annuity payouts include period certain or life and joint and survivor. In many ways, an annuity functions like the reverse of a life insurance policy. Under a life insurance policy, an insured’s loved ones are protected from financial ruin when the insured dies early. Under an annuity, the annuitant and his loved ones are protected from financial ruin when the annuitant (or a couple) lives beyond his (their) expectation of life.

Annuities can be purchased with a single premium or installments. There are no medical qualifications and annuities can be designed to accumulate at a guaranteed interest rate, or variable contract (participation in selected investment options). Many new products provide for market appreciation without market risk. Buzz words to look for are “Indexed Annuities” or “High Water Mark”. At a future date, usually at retirement, the annuitant can convert his/her annuity into a life annuity or a number of other combinations.

Annuities are gaining in popularity as more people don’t want to gamble with their financial future, or the fear of running out of money.

Before purchasing an annuity, make sure that you fully understand the product and make sure that it is a suitable product for your particular situation. For more information, contact QuoteBroker