Poor Health Can Be a Factor in Producing More Retirement Income
There’s a type of annuity that pays you more if your health profile is not good. This may sound strange, but here’s how it works:
SPIA, which stands for Single Premium Immediate Annuity (also referred to as health adjusted immediate annuity), has long been a popular investment for obtaining a fixed income which cannot be outlived (income for life). With the income for life option, the issuing insurance companycalculates the size of your monthly payment based on standard life expectancy tables, based on an analysis of your health. Once calculated at the beginning, you continue to receive the same monthly amount, regardless of how long you live. It’s almost like getting a second social security check.
companies take into account your individual health condition and use that information to calculate your life expectancy. If your health records indicate conditions that could lower your life expectancy, this is factored into the monthly payment you receive and increases the monthly payment. You then receive this fixed monthly amount no matter how long you live.|
Take this hypothetical example. A man age 70 decides to obtain a SPIA. He deposits a $100,000 premium and based on his standard life expectancy of 16 years, his monthly payment is $871.05 (a 10.4% annual payout rate). He will receive this fixed monthly amount regardless of how long he lives. However, if he has a negative health profile and the insurance companies calculate his life expectancy at only 10 years, his monthly payment will jump to $1393.68. Because of the negative health history, this annuitant receives more income for life.
SPIAs have been most popular with single individuals who are not concerned with leaving an inheritance. That’s because, once the initial premium is paid, the SPIA cannot be surrendered for value. Rather, you receive a fixed monthly income for life. For those people who like the idea of increasing their monthly income and do want to leave funds to heirs, remember that you would use only a part of your assets for a SPIA and other assets can be designated for heirs.
If you’ve been relying on other sources for tax-sheltered income such as municipal bonds, you may find that an SPIA will increase your monthly tax sheltered income.
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January 16th, 2009 at 12:58 am
[...] Poor Health Can Be a Factor in Producing More Retirement Income … [...]
February 5th, 2009 at 3:15 am
I haveno idea about SPIA.. i guess I need to tell my single friend about this. This seems a good news.
Dennis Towlers last blog post..Caring for Elderly Parents
March 30th, 2009 at 2:39 am
I understand your problem I’ve been having the same health problem myself for sometime.
May 30th, 2009 at 12:46 pm
Great intro on SPIA which is indeed a new idea to me. So having to deposit $100k up front, basically the guy with the $871.05 payouts will end up getting $167,241 in 16 years and the guy with the $1393.68 payouts will end up getting the same $167,241 in 10 years. Assuming he could improve his lifestyle and live longer than the projected 10 years, he can definitely come out ahead than the other guy? Very interesting concepts.
June 4th, 2009 at 11:31 pm
There are different types of annuity and the monthly income will vary a great deal. There are three major types of deferred annuities:. Fixed Deferred annuities; Equity-Indexed annuities; Variable Annuities. Like pensions, they offer a deferred annuity to provide a guaranteed income throughout retirement. A great source for poor health persons in producing more retirement income.
July 20th, 2009 at 1:15 am
Studies that have looked at only poor countries or all countries have consistently found that better health, typically measured by life expectancy, is a significant determinant of subsequent economic growth, in some cases contributing more than improved education.
July 23rd, 2009 at 9:41 pm
I agree with the above comment. The country I live is classed as developing country. Yet our medical services are at the highest standards as any developed country in the world. And medical is free as well. I certainly believe this is a really important factor to consider to regard a country developed or developing.
July 24th, 2009 at 4:57 am
Five years ago, the Commission on Macroeconomics and Health concluded that ill health was contributing to the low level of economic growth in poor countries.1 The landmark report showed that investment in some basic health interventions would lead to substantial economic growth.