Immediate vs Longevity Annuities

Both of these products offer a guaranteed income for life. Immediate annuities, as the name suggests, immediately begin to generate lifetime income. Longevity annuities delay payments until the retiree hits an advanced age, such as 80 or 85. New research by the nonpartisan Employee Benefit Research Institute (EBRI) finds that, generally, either type of annuity would be effective at reaching desired income adequacy targets. However, the EBRI analysis also shows that a key factor in planning for a high level of retirement income adequacy (90 percent) is whether the costs of long-term care are included in the calculations or not. The report analyzes how differently immediate and longevity annuities can affect probable income adequacy in retirement by taking into account long-term health care expenditures. You can view the full report at the EBRI website.






6 responses to “Immediate vs Longevity Annuities”

  1. Annuities are appropriate for people who need a tax shelter, and are a high commission laden investment. There are other less expensive investment opportunities to generate monthly income. People need to keep in mind that purchasing annuities in tax deferred investments (i.e. IRAs, etc.) is tantamount to wearing two rain coats. Annuities may be appropriate for some, but not for all. Thus, I’d strongly recommend checking with a financial advisor and/or CPA prior to moving forward.

  2. Adam is right, annuities work great but the circumstances and financial factors surrounding a person or couples financial situation have to be right for any annuity to work how it should. Best to always consult with a professional before making any decisions.

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  5. Jennifer Dovedy

    Hi, I was wondering if this was similar to Swiss annuities? I recently stumbled upon an (according to Wikipedia) industry leader’s website, Does EBRI research cover Swiss annuities? I need some info. Jenn

  6. I’ve read from a newspaper says that a retiree can increase sustainable spending rate if the retiree purchases a “longevity annuity”, a contract that make periodic payments starting at some point in the future with a small portion of her portfolio. The longevity annuity is compared with the more common “immediate annuity”.