This issue:
Longevity Insurance
Consider longevity insurance.
Why
Only a third of Americans say they would like to live to 100.
Reasons include fearing they will run out of money and be poor.
In a previous newsletter I cited a British man who bet $200 he would
live to 100 and eventually received $50,000 for winning his bet.
Since then the odds makers want to increase the target to 110 years old.
But there is a relatively new way to win that kind of bet – longevity insurance.
Personally, I really dislike life insurance as I hate betting against myself.
You (or rather your survivors) only get the money if you die.
Longevity insurance rewards you for living longer and helps make sure
you have enough income starting at age 85. For example, let’s say a
65-year-old man pays $50,000 in after tax money for a longevity policy.
At age 85 he starts collecting $3,614 a month ($43,368 a year)
for the rest of his life.
If he dies before age 85 he and his heirs receive nothing. For women,
the monthly payments would be somewhat lower because of a longer
life expectancy. Of course you can purchase the insurance before age
65 and receive even higher monthly premiums at 85.
At age
65, life expectancy for American men
(2004 data)
was
82.1 years and women 85 years. Met Life, Hartford, and other insurance
companies are betting that in most cases they won’t have to pay anything.
You
could take the same money and invest it in stocks or bonds.
That would allow you to take money out in an emergency and to
pass on money to heirs. If you get a 6% after
tax return rate
on your investments compounded over 20 years,
you would start
coming out ahead a shortly before your 90th birthday
with the longevity insurance.
The
primary advantage of the insurance is less concern about outliving your money.
It also might be out of reach in the event of a lawsuit or divorce. Unlike life
insurance,
you don’t need to qualify, you only need a birth certificate.
The biggest risk with longevity
insurance is
not
living to 85 and collecting nothing.
Another risk is the
insurance company could go out of business.
Another consideration is the
likelihood of inflation. Whether you invest the money
in an IRA or have longevity insurance,
the money
will probably have far less purchasing
power in 20 years.
At 4% inflation compounded annually, $1,000 in today’s money
would be worth
$456 in 20 years. In our previous example the monthly payment
would be
equivalent
to $1,648 in today’s dollars and each year the value would be a little less.
Quotes
Humor
My wife and I took out life insurance policies on each other,
so now it’s just a waiting game.
~Bill Dwyer
The
insurance man told me that the accident policy covered falling off the roof,
but not hitting the ground.
~Tommy Cooper
Can atheists get insurance for acts of God?
This article is from:
Anti-Aging
PsychologyThe following newsletter articles may be reprinted in E-zines, newsletters, newspapers, and magazines provided they the content is not edited and the attribution below is given. Formatting may be changed and you may use one of the web site pictures of the author to accompany the article.
"Dr. Michael Brickey, The Anti-Aging Psychologist, teaches people to think, feel, look and be more youthful. He is an inspiring keynote speaker and Oprah-featured author. His works include: Defy Aging, 52 Baby Steps to grow young, and Reverse Aging (anti-aging hypnosis CDs). Visit www.NotAging.com for a free report on anti-aging secrets and a free newsletter with practical anti-aging tips."