A longevity annuity is a type of fixed annuity. It is often sold to investors around retirement age as a way to protect against outliving their retirement savings. In a longevity annuity contract, the investor pays a large amount up front (e.g., $100,000 or more). In return, the insurance company guarantees a specific monthly payout for life beginning at a future chosen date or age (e.g., age 85). After purchase, the investor cannot access the amount they invested to purchase the contract, and will only receive the contract’s guarantee if they are alive on the payout start date. In addition, if the investor dies before their payouts begin, their beneficiary gets nothing, unless the investor purchased an optional death benefit. Because an investor in a longevity annuity gives up access to their up-front payment, delays income payouts, and foregoes a death benefit (if they don’t purchase an optional one), the investor may receive higher payouts than if they purchased a traditional immediate annuity. Under certain longevity annuity contracts, if the investor changes the payout start date, the insurance company could significantly lower the payout amount. One common type of longevity annuity is a qualified longevity annuity contract (QLAC). A QLAC meets certain IRS requirements and must be purchased with money from a retirement account, such as a 401(k) or IRA. Longevity annuities are sometimes also called deferred income annuities or longevity insurance.

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