Everybody wants to make sure that they have enough money for retirement. However, the one variable nobody knows for sure is how long they are going to live. If you retire at 65 and end living to 85 you won’t need as much as if you end up living to 125.

This is where longevity insurance comes in. Essentially longevity insurance is like an annuity, but one that only starts paying out once you reach a certain age (usually 80 to 85). It can help protect you should you be fortunate enough to live longer than you originally budgeted for.

Seems good on paper right? Well longevity insurance may or may not be a good idea depending on your retirement goals. First, of all you only get the money if you live past the age the longevity insurance starts. So, you will have to live for several years beyond the start of the annuity, before you recoup the amount invested.

Second, if you happen to pass away before the policy kicks in you and your heirs get nothing. Therefore, for some people it may be better just to invest the money they would have spent on the policy.

Finally, there is always the risk that the insurance company will go out of business. Again, in that case you would be left with nothing. Thus, if you do opt for this kind of policy make sure you research any company offering it before buying.

So, what can we conclude? Longevity insurance could be part of your retirement planning but it should not be the biggest part. It should not be a substitute for retirement saving and investing. However, if you do plan on living a long time and are not certain your savings will see you though, longevity insurance may be for you.