Project Description

The U.S. Treasury Department recently announced that individuals are now allowed to invest a portion of their 401(k)s or IRAs into a longevity annuity. A longevity annuity, a type of deferred income annuity, provides a steady flow of income to an individual once they reach a certain age and continue to receive income for as long as they live. The longer you defer receiving the payments, the higher the payment amounts you will begin collecting. With healthcare costs rising, especially at an older age, investing in a longevity annuity can be another alternative for retirees to pay for long-term care.

The new Treasury rules also make investing in longevity annuities more appealing to individuals by exempting the purchase of the annuities from the required minimum distribution requirements that need to be met once an individual reaches age 70 ½. The purchase exemption amount is up to 25% of an individual’s 401(K) or IRA account balance or (if less) $125,000. In addition, the ruling also allows a “return of premium” death benefit. If the purchasing retiree dies before (or after) the age when the annuity begins, the premiums they paid but not yet received as annuity payments will be returned to their accounts, and thus can go to their heir(s).

You can find more information about the U.S. Treasury ruling here.