When people reach retirement or are within ten years of retirement more consideration must be given to how to best protect their “nest eggs” and how to make sure that their income doesn’t run out before they do. That gets a little tricky because we as a society are living longer than ever before. When I started in the insurance and financial industry in 1975, life expectancy was 72 years of age for Men, 74 for Women. Today that has increased by about 6 years and amazingly, has increased by some 30 years in the 20th Century alone. As stated at Wikipedia.com (http://en.wikipedia.org/wiki/Life_expectancy) “During the 20th Century, the average lifespan in the United States increased by more than 30 years, of which 25 years can be attributed to advances in public health“.
All of this means that there is a real danger of running out of retirement money during their lifetime. One of the new developments in the Retirement Planning Arena today has been the development of Life-Time Income Riders. What are income riders? They will likely become a “god send” for many retirees because they take the guess work out of retirement planning because an insurance company agrees to guarantee their income for life. Unlike the Single Premium Immediate Annuities (SPIA) of the past however, their money is not spent and they regain control of their funds. Any remaining unused funds are paid to named beneficiaries upon death. SPIA’s, on the other hand, terminated with unpaid funds being kept by the insurance company. Not the case with Life-Time Income Riders. It’s like having your “cake and eating it to” in a sense.
Does Life-Time income riders make sense in all cases. Maybe not. If you are a multimillionaire and can benefits with depreciation schedules or other advanced financial techniques and can afford to hire those who provide those services, then you may not find Life-Time Income Riders all that attractive. On the other hand, if you are a teacher with Drop money, an employee with 401-K funds or a self-employed individual with an Individual Retirement Account who wants to guarantee their retirement income regardless of what the market does, what interest rate are or how long you will live, then Life-Time Income Riders could be exactly what you need.