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Such policies
might be an unhappy compromise. What if you end up spending a
decade or more in a nursing home? A three-year policy may merely
postpone when you are impoverished. A possible
solution:
Buying longevity insurance instead of
long term care insurance, or in conjunction with it.
Never heard
of longevity insurance? Insurers are only now rolling out
these policies.
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Longevity
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For instance, last
year, MetLife introduced "retirement income insurance,"
which allows folks age 55 or older to invest a lump sum, thereby
purchasing income that will start at age 85.
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Hartford Financial will launch a similar product in April, and New
York Life should have its version out later this year.
What's so great
about longevity insurance? It gives you the freedom to
spend down your nest egg, knowing you have locked up an income
stream for later in retirement.
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Maybe you will need
that income for nursing-home costs. But unlike with
long-term-care insurance, you don't have to be sick to get the
money, so longevity insurance would also help if you remain
healthy. And because your longevity insurance will pay income for
life, there's no risk you will outlive the benefit, which could
happen with many long-term-care policies.
There is, however,
a drawback. "Your income stream from longevity insurance might
start at age 84," notes Ted Mathas, an executive vice president
with New York Life. "But what if you get sick at 78?"
The implication:
Before you buy longevity insurance as a substitute for
long term care insurance, make sure you have enough savings to pay
for any long-term-care expenses during the intervening years.
Source: Article in the WSJ Feb
22, 2006
In its simplest form, the
premise of longevity products is that by
making a one-time payment, you will start receiving guaranteed
lifetime income at a designated point in the future. Your
projected income stream is calculated at the time that you invest.
The purchase doesn't have to be made at 60 or 65. Marketers of
these products generally focus on those years because that's
typically when investors have a good idea what kind of a
retirement stash they're looking at, and how much longevity income
they might need -- or at least how much they can afford.
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