Kevin McCormally: I am Kevin McCormally of Kiplingers, and I am here with Kim Lankford, the Insurance Editor of Kiplinger's Personal Finance Magazine to talk about longevity insurance. Kim, do people really want to insure against living too long?
Kim Lankford: Well they definitely do. The longevity insurance actually protects you, if you live past a certain age, like 85 or so. So you can guarantee that you won't outlive some of your money.
Kevin McCormally: How does it work?
Kim Lankford: Well say for example, you invest $50,000 into longevity insurance policy when you are 65. if you live past 85, the policy will pay out $40,000 per year.
Kevin McCormally: You invest $50,000 and you get $40,000 a year, how can they afford that?
Kim Lankford: Well, it really is taking a risk that you are going to live that long and many people don't live past 85, but if you do, that guarantees you will continue to receive that income as long as you do live.
Kevin McCormally: Oh! wait a minute, most people die before they are 85. Is this a good deal for anybody?
Kim Lankford: Well, if you are worried about outliving your income. If your family has a history of longevity, it can really make you feel much more confident. Spending the rest of your money up until 85 and knowing you have something that will stay as long as you live.
Kevin McCormally: What's the alternative?
Kim Lankford: Well, you could also try this on your own. For example by setting in side money when you are 65 on your own investing it and then if you are still alive at 85 you can buy an immediate annuity that would then continue to pay every year for the rest of your life.
Kevin McCormally: But doing it that way you would have the flexibility doing something else with that money between 65 and 85.
Kim Lankford: Exactly, the positive side to that is you have the flexibility. If you need to access that extra money, you can. If you die before, then your heirs can get it. On the downside you won't receive quite as much money each year.
Kevin McCormally: Okay thank you Kim.
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