Should an 85-Year-Old Buy an Annuity? A Comprehensive Guide

I’m so happy you came along for the ongoing series on how to purchase an annuity. I know this isn’t a sales pitch, bad dinner seminar, or an unveiling. We’re answering a lot of questions, so we’re doing a series on how to purchase an annuity. What age is too young or too old to purchase an annuity is the topic of discussion for today.

This is a really good question, and I hope that a lot of agents and advisors are seeing this since they need to know. Since many annuities are positioned incorrectly—either with someone too young or someone too old—we However, I’ll share with you my interpretation of what that means—that is, what is too young and too old.

Keywords: annuity, 85 years old, income, investment, retirement, guaranteed income, life expectancy, financial planning, financial advisor, surrender penalties, death benefits, market value adjustment, lifetime income benefit rider, return of premium death benefit

As you approach retirement, you may be wondering how to best manage your savings and ensure a steady stream of income for the rest of your life. Annuities can be a valuable tool for retirees, but it’s important to understand whether they are the right fit for you, especially if you are over the age of 85.

This comprehensive guide will help you understand the different types of annuities available, their pros and cons, and whether they are a suitable investment for someone over the age of 85. We will also discuss some key factors to consider before purchasing an annuity, such as your health, life expectancy, income needs, and financial goals.

Understanding Annuities

An annuity is a contract between you and an insurance company. You make a lump-sum payment to the insurance company, and in return, they agree to pay you a series of regular payments for a set period of time or for the rest of your life.

There are two main types of annuities:

Immediate annuities: These annuities start paying out income immediately after you purchase them.
Deferred annuities: These annuities allow your money to grow tax-deferred for a period of time before you start receiving payments.

Are Annuities Right for Investors Over 85?

Whether or not an annuity is right for you depends on your individual circumstances. However, there are some general considerations to keep in mind if you are over the age of 85:

Life expectancy: According to the Center for Disease Control, a male at age 85 has an average life expectancy of 6.5 years. This means that if you purchase an immediate annuity, you may not receive enough payments to cover your investment.
Income needs: Annuities can provide a guaranteed stream of income, which can be helpful if you are concerned about outliving your savings. However, the amount of income you receive will depend on the type of annuity you purchase and your life expectancy.
Financial goals: Annuities can be a good way to protect your principal and ensure that you have income for the rest of your life. However, they may not be the best option if you are looking to grow your money or leave a large inheritance to your heirs.

Different Types of Annuities for Investors Over 85

There are several different types of annuities that may be suitable for investors over the age of 85. Here is a brief overview of some of the most common options:

Immediate annuities with lifetime income guarantees: These annuities provide a guaranteed stream of income for as long as you live. However, the amount of income you receive will be lower than if you were younger.
Period certain/cash refund immediate annuities: These annuities guarantee payments for a set period of time, even if you die before the end of the term. If you die before receiving all of your payments, your beneficiaries will receive the remaining amount.
CD-type fixed annuities: These annuities guarantee a specific interest rate for a set period of time. They are a relatively safe investment, but the interest rates are typically low.
Variable annuities with lifetime income riders: These annuities allow you to participate in the stock market while still guaranteeing a minimum level of income for life. However, the income you receive will depend on the performance of the underlying investments.
Variable annuities with return of premium death benefits: These annuities guarantee that your beneficiaries will receive at least the amount you originally invested, even if the value of the annuity declines.

Key Factors to Consider Before Purchasing an Annuity

Before you purchase an annuity, it is important to carefully consider your individual circumstances. Here are some key factors to keep in mind:

Your health: If you are in good health and have a family history of longevity, you may be more likely to benefit from an annuity.
Your life expectancy: The longer your life expectancy, the more likely you are to receive a good return on your investment.
Your income needs: Annuities can provide a guaranteed stream of income, which can be helpful if you are concerned about outliving your savings. However, the amount of income you receive will depend on the type of annuity you purchase and your life expectancy.
Your financial goals: Annuities can be a good way to protect your principal and ensure that you have income for the rest of your life. However, they may not be the best option if you are looking to grow your money or leave a large inheritance to your heirs.
Surrender penalties: Some annuities have surrender penalties if you withdraw your money before a certain period of time. This can be a significant factor to consider if you think you may need to access your money in the future.
Death benefits: Some annuities offer death benefits that will pay out a certain amount of money to your beneficiaries if you die before you have received all of your payments.
Market value adjustment: Some annuities have a market value adjustment (MVA) that can reduce the value of your annuity if interest rates rise. This can be a significant factor to consider if you are concerned about inflation.
Lifetime income benefit rider: Some annuities offer a lifetime income benefit rider that guarantees you a minimum level of income for life. This can be a good option if you are concerned about outliving your savings.
Return of premium death benefit: Some annuities offer a return of premium death benefit that guarantees your beneficiaries will receive at least the amount you originally invested, even if the value of the annuity declines. This can be a good option if you want to ensure that your beneficiaries will receive some money from your annuity.

Working with a Financial Advisor

It is important to work with a qualified financial advisor before purchasing an annuity. A financial advisor can help you understand your options and choose the right annuity for your needs. They can also help you understand the risks and benefits of annuities and make sure that you are making an informed decision.

Annuities can be a valuable tool for retirees, but it is important to understand whether they are the right fit for you, especially if you are over the age of 85. By carefully considering your individual circumstances and working with a qualified financial advisor, you can make an informed decision about whether an annuity is right for you.

When You Are Young

What is the age at which something is too young, too old, etc.? Let’s start with the former. People in their 20s, 30s, and 40s call me frequently with questions regarding annuities. Ironically, or perhaps more accurately, tragically, most calls are from people trying to sell an annuity of any kind to people who are 20 years old, 30 years old, or 40 years old. I ask them how old they are, and they respond, “Well, I’m 35, or I’m 37, or I’m 40,” or something like that.

Heres the bottom line. Annuities of any kind are not something you should seriously consider if you are under 50 years old. Let me give you the reasons why. Let’s say you are considering an income writer linked to an index annuity or a lifetime income annuity such as a deferred income annuity, single premium immediate annuity, qualified longevity annuity contract, or any combination thereof. Keep in mind that the lifetime income stream is mostly determined by how long you expect to live at the time the payment is made.

Because of your lengthy life expectancy, if you’re young and looking for a guaranteed source of income to start pretty soon, that income amount will be small. You have to look at that. Interest rates are not the primary factor in pricing; rather, the income pricing train is driven by life expectancy. If you’re under 50 and looking for a lifetime income stream, I would rather keep your money in growth components—a growth market strategy that excludes annuities.

Stock market growth annuities should never be bought for that purpose. Although I am aware that many variable annuity salespeople are screaming at screens, a variable annuity has restrictions on the options available. Most of these variable annuities have high fees. If you’re younger than fifty, you have time for market volatility before you can offset losses and other factors. Any kind of annuity should never be purchased by someone under 50. Â.

Heres another reason. The IRS informs us that there is a 10 percent penalty if you withdraw funds from an annuity, such as a fixed index annuity or a multi-year guaranteed annuity, before you turn fifty-nine and a half. Again, you shouldn’t be purchasing any kind of annuity at that age. Though those are one-offs, there are certain circumstances and asterisks that we deal with, such as when there is a child, grandchild, or other individual who has special needs and for whom we must establish a lifetime income stream.

When You Are Older

Now, lets talk about being too old. Annuities can be issued in some types, not all types. That didn’t mean a nine-year-old should be purchasing them as far out as ninety years old. Some product types have cutoffs at age 85. That doesn’t mean you have to buy, but if you’re 80 years of age or older, we should definitely talk. I need to know why you are considering an annuity. Don’t just attend the awful chicken dinner seminar because they are giving away food; instead, consider the contractual issues you are attempting to resolve and the asset’s intended outcome. Always tell yourself to swallow the food rather than the sales pitch if you’re going to do that.

My mom, whos in St. Augustine, Florida, is a professional plate-liker. She attends all of these events, but she doesn’t make any purchases because, in the end, she will either be called for an appointment or asked to attend the bad chicken dinner seminar. “Stan Annuity is my son,” she’ll say, and they’ll go, “Oh my God, you’re his mother.” In the end, I need to talk to you if you’re 80 years of age or older, but it’s okay if you want to eat their food.

I don’t think you’re not a skilled tech, but you are, and you’re probably even more skilled than I am. I need to understand the suitability. I need to understand the appropriateness. I need to understand what youre trying to achieve. These days, it might be a legacy; it might be in-home or long-term care. It might serve as moral defense, or you might require a lifetime income stream to cover any potential gaps in your income. However, I want to stop anyone over 80 from rejecting the sales pitch’s utopia.

How to Buy an Annuity: What age is too old or too young?

FAQ

Should an elderly person buy an annuity?

The bottom line Annuities may make sense to consider for seniors — and that’s especially true for those who are looking to generate a stable income or protect themselves from growing prices.

Can I buy an annuity at age 85?

In exchange, the insurance company guarantees your money will earn compound interest over a set period of time. That period tends to last for many years. You generally have the ability to purchase a multi-year guarantee annuity until age 85. Some carriers may permit MYGA purchases even beyond that.

At what age should you not buy an annuity?

Those aged 50 to 70 are typically best positioned to buy annuities, but the reasons to do so vary by age group. Legally, you must be 18 to buy an annuity. Many annuity providers set their own minimum age limit of 50 and maximum of somewhere between 75 and 95 years old.

Is 80 too old for an annuity?

Investing in an income annuity should be considered as part of an overall strategy that includes growth assets that can help offset inflation throughout your lifetime. Most financial advisors will tell you that the best age for starting an income annuity is between 70 and 75, which allows for the maximum payout.

How much can annuities pay out at age 85?

At age 85, it’s your remaining life expectancy that allows the insurance company to provide this high payout. If you invested $100,000 in the annuity product, the company could make payments of $8,500 per year for almost 12 years just with the money you invested.

Should you buy an annuity if you’re 65?

In addition, you benefit from the higher payouts that come with buying an annuity at an older age. For example, according to ImmediateAnnuities.com, a 65-year-old man with $200,000 to invest in an annuity, could buy one for $100,000 to generate $493 now in monthly, lifelong income.

Are Longevity annuities a good deal for seniors?

Longevity annuities can be a good deal for seniors. But not many people buy them Longevity annuities pay monthly income for life, generally starting between age 75 and 85. They’re among the best financial deals for seniors who are worried about outliving their savings due to old age, according to retirement experts.

What is the best age to get an annuity?

The best age at which to get an annuity depends on a number of factors, including a person’s current circumstances and investments, risk tolerance, longevity prospects, and expected income needs in retirement. Given these factors, the best age to get an annuity is when you are able to optimize its benefits for your individual needs.