These Features Can Affect Your Longevity Annuity Rates

Published September 5, 2017
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:

Feature Let’s Think About It!
Age 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.

Gender Males generate larger income than females.

Females have longer life expectancies, and therefore longer payout periods, so they receive slightly less income each year.

Premium Size 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 vs. 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.

Payout Options 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.

Riders 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.

Lauren Minches

Lauren Minches

Financial Planning Professional

Lauren is an actuary by training with expertise in retirement, finance, and risk. She writes about annuities to make them easier to understand and evaluate. Her goal is to help people create retirements with more time for living and less time thinking about money.