
Longevity Annuities
How Will My Longevity Annuity Be Taxed?
The kind of savings used to purchase your longevity annuity will determine the taxes owed on the income payments you receive. We’ve broken down how you may be taxed.
If you’re wondering about the financial value of a longevity annuity, you’re definitely not alone! Our customers often want to know about the internal rate of return (IRR) or return on investment (ROI) in order to compare the returns to their market investments.
To calculate an IRR or ROI, we need to know the upfront investment and all future income amounts and dates. But a longevity annuity is an insurance product which will provide you with income for as long as you’re alive, i.e. end date to be determined!
Instead, we can calculate a range of IRRs based on your potential lifespan. The longer you live, the higher the IRR of your longevity annuity. While you should think about the numerical return while making the decision to purchase a longevity annuity, the risk reduction against increasing longevity and peace of mind it provides for your retirement are critical considerations.
As an example, 50-year-old Alan bought a $100,000 longevity annuity with income starting at age 85. The policy could wind up generating a 3.9% return if he lives until 90, which increases to 5.3% at age 95 and 6.0% at age 100.
Remember, a longevity annuity is insurance. Its purpose is to protect your longevity via guaranteed lifetime income! If you are ready to get your longevity annuity quotes, visit our annuity calculators page.
The kind of savings used to purchase your longevity annuity will determine the taxes owed on the income payments you receive. We’ve broken down how you may be taxed.
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