Annuities Could Ease Health Care Costs for Retirees

A new study by the Insured Retirement Institute (IRI) found that 63% of Baby Boomers nearing retirement are highly concerned that they will not have enough money in retirement to pay for their health care costs. It’s no secret that American’s are living longer and with the rising cost of health care costs, retirees and soon to be retirees are facing unprecedented financial challenges.

The study found that Baby Boomers as a whole are not saving enough for retirement and their financial planners or financial advisors are not addressing the fact that health care costs will be a major factor for most retirees in the years to come.
“Consumers have every reason to be concerned. According to the U.S. Bureau of Labor Statistics, expenses for health care per household averaged $3,100 during 2009, up 5% from the prior year and health care costs continue to outpace inflation by more than 3%.”

How to use Annuities

Annuities can help consumers ‘cushion’ retirement health care costs, researchers say. For instance, the consumer can use immediate annuities or deferred annuities with a guaranteed minimum withdrawal benefit (GMWB). This would provide a base of guaranteed lifetime income that further supplements Social Security income.

Even at today’s low interest rates, a 65 year old male could purchase an immediate annuity that will pay $1,000 per month with a 10 year guarantee of income for a deposit of about $175,000. A fixed term annuity for 10 years would require a $100,000 deposit and an annuity for 5 years would be less than $60,000 per www.immediateannuities.com

This approach will reduce the investment that a pre-retiree will need to make today to fund future health care expenses.

A consumer 55 years old, who wants to go it on his own, would need to invest $180,525 today with an annual yield of 3 percent to pre-fund his retirement health care. By comparison, this same 55 year old could pre-fund this care by purchasing an annuity with a GMWB for only $60,000 according to the IRI report.

Annuities will play an very important role in retirement for many people who are open-minded and are looking for solutions to supplement their income. Unfortunately, consumers are not getting the positive message about annuities because they are often overlooked by financial advisors or demonized by financial celebrities.

For more information about how annuities can help your retirement plan, call our office at: 914-633-1717