The damaged pension system, including that of Social Security, has resulted in the diminished capability to provide ample income to its participants. The program’s stability has been compromised due to threats of underfunding, and further budget cuts because of the government wanting to reduce deficits will only result in the increased erosion of the value of future payouts.
The Employee Benefit Research Institute, also known as the EBRI, found early in the year that there are above-average percentages of Americans from all income levels that won’t be able to put away enough money for retirement expenses. A 2010 EBRI study also predicts that even more affluent Americans are financial troubled – a third of all individuals who fall under the second-highest bracket stand the chance of running out of funds within one to two decades of retiring. For the lowest two income brackets, about two-thirds of all workers will run out of money in approximately ten years.
Longevity insurance seems like a good idea under these circumstances. While only a relatively small number of major insurers provide this type of coverage, these products have started to become part of many seniors’ retirement plans. This insurance is basically an annuity that generates deferred income, which policy holders can receive once they’ve reached a specific age. It is much like a modified SPIA or Single Premium Immediate Annuity, which gives investors lifetime income after paying a lump sum to the insurer.