50+ Lifestyles

The Gift of Time

By Richard J. Schillig, CLU, ChFC, LUTCF
Independent Insurance and Financial Advisor

It is common knowledge that average lifespans are increasing. Statistics show that people are living longer than ever before. With healthcare improvements on the rise, the death rate is declining across the globe. In fact, medical and technological advancements – like the pasteurization of milk, the polio vaccine, and the use of embryonic stem cells – have all contributed to increases in the average lifespan. Historically the 1900 life expectancy was around age 50. Today the centenarian population – or those 100 years or older – has substantially increased to unheard of statistics. In fact, as of the last U.S. Census (2010), there are more than 53,000 centenarians living among us. That’s right – more than 53,000! And, some predict that number will reach three million by 2050. [Source: World Population Ageing 1950-2050]

This longer life expectancy is wonderful allowing retirees to really enjoy unprecedented long retirements. The additional bonanza of time presents a real challenge. Those extra years of life must be accompanied with assurances our retirement resources will last through our longer life. To fully grasp this challenge, it is important to understand what life expectancy means for today’s retirees. In addition to the huge centenarian population gains, based on the 2012 I-AM Mortality Tables, 50 out of 100 65-year old men will live to age 88. 25 will live to age 94 and 5 will reach age 100. For a couple, a 60-year old husband and wife, 50 out of 100 will have one person live another 34 years, 25 will have one person live another 38 years and 5 will have one person live another 43 years. Longer life expectancy presents this challenge – our resources – our retirement resources (social security, pensions, 401k plans or equivalent plans) – must also live on to guarantee our survival income.

Retirement income survival is essential for each and everyone one of us however it is even more essential and much more critical for couples. Retired husbands and wives are dependent on each other’s income. The death of one spouse results in loss of one social security check that may substantially reduce monthly income for the surviving spouse. Further often times pension income or other monthly retirement income is reduced.

Our creative and unique split annuity strategies are designed to meet this challenge head-on. Split annuities consist of arranging or splitting retirement money between two or more annuities issued simultaneously. One annuity begins to pay income immediately over a period of time.

We normally use a 5 year pay-out period for the immediate annuity. While monthly payments begin one or more deferred annuities begin to accumulate earnings. The concept of the split annuity is preserve the original principle by having deferred side of the split earn sufficiently to replace the monthly income paid out by the immediate annuity.

In today’s low interest environment having a deferred side of the split earn sufficiently to replace the income paid out from the immediate is a real challenge. The fixed index annuity as a funding vehicle for the deferred annuity offers the opportunity to achieve this goal.

Fixed index annuities do not lose value. Fixed index annuity account values either remain the same from one reporting period to the next OR they increase in value. Fixed index annuities do not lose value with stock and mutual fund market losses. Growth of the fixed index annuity is based on the performance or one or more of the market indices; S&P 500, Nasdaq 100, FTSE 100, or a combination of blended indices.

Use of our split annuity arrangements are very appropriate for providing continued income for today’s enhanced life expectancy. Encourage all of our readers to call our office to obtain additional details and determine appropriateness of these arrangements for your situation. Determine your options for lifetime income.

Richard J. Schillig, CLU, ChFC, LUTCF is an Independent Insurance and Financial Advisor with RJS and Associates, Inc. He can be reached at (563) 332-2200.