These Features Can Affect Your Longevity Annuity Rates
Jan 18, 2023
Blueprint Income Team
Your personal attributes and the extra features you choose to customize your longevity annuity with will affect the income you can generate. We’ve broken down how each option will affect your rates.
- See our table below for the different features that impact longevity annuity rates
- Age, gender, premium size, spousal continuation and optional riders will affect payouts
Insurance companies calculate the size of your income based on how long they expect to pay you. Your personal attributes and the extra features you choose will affect longevity annuity rates and the income you will generate. Here’s how to think about these:
Let's Think About It!
Buying when younger generates larger incomes.
If you purchase a longevity annuity earlier, you will generate more income, since the insurance company has more time to invest your money before starting to give you income.
Males generate larger income than females.
Females have longer life expectancies, and therefore longer payout periods, so they receive slightly less income each year.
Income will increase with higher premiums. A portion of the insurance company’s expenses incurred are fixed per contract such that incremental premium can go entirely towards buying income. Said another way, there is a discount for larger premium deposits.
Income Start Date
Later start dates generate larger incomes.
Longer deferral periods mean more time for the insurance company to invest your money before starting payments. It also means shorter payout periods so they can pay you more with each income payment.
Single v. Joint Life
Single policies generate larger incomes than joint-life policies.
A joint-life policy will continue as long as both members of the contract are alive, which will be longer than if only a single person is on the policy. Since insurance companies expect longer payout periods, they provide less income each year.
Basic plans without extra guarantees generate larger incomes than plans with extra features.
There are plan features you can add to your longevity annuity that will make the guarantee more robust. Features like cash and installment refunds will guarantee a minimum cumulative income, while period certain will guarantee a minimum number of payments. These will lower your income payments because the insurance company expects to pay you for longer.
Basic plans without riders will generate larger incomes than plans with riders.
Riders, or extra features that offer you increased protection, require that the insurance company take on more risk. Therefore, the income payments will be lower to compensate the insurance companies.
Last, there’s generally an inverse relationship between the credit rating of an insurance company and the income return they’ll offer for your premium. Insurers with higher ratings maintain higher capital reserves and invest more conservatively, which limits their profits and what income they can offer you. Here at Blueprint Income, we only offer insurers who have an A rating or higher, because the guaranteed income you’re promised is only as good as the financial strength and the longevity of the insurer backing it.
If you would like to get your personalized longevity annuity rates, visit our annuity calculators page.
Blueprint Income Team
We are a team of finance, insurance, and actuarial professionals working to make it easier for everyone to achieve a steady and comfortable retirement. We write about annuities (the good and the bad) and provide strategies to help Americans prepare for retirement.