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Advanced Life Deferred Annuities Michigan

A look at Advanced LIfe Deferred Annuities (ALDA), an insurance policy that guarantees a lifetime income starting at the age of 80.

Local Companies

Romain Allen J Cfp
(517) 223-9578
5182 Owosso Rd
Fowlerville, MI

Retirement Strategies Inc
(248) 473-1111
21999 Farmington Rd
Farmington Hills, MI

Wyzgowski & Associates
(810) 984-4212
1979 Holland Ave
Port Huron, MI

American Express Financial Advisors Inc
(269) 685-6417
352 12th St
Plainwell, MI

Tesfaye Kebede Financial & Insurance Consultants
(248) 723-0811
30150 Telegraph Rd
Bingham Farms, MI

Great Lakes Financial Management Llc
(616) 957-4380
688 Cascade West Pkwy SE Ste 200
Grand Rapids, MI

Paul Gary L
(734) 428-9585
122 W Main St
Manchester, MI

Financial Solutions of Michigan
(248) 585-5333
850 Stephenson Hwy
Troy, MI

Staub Financial Services
(248) 666-1844
6909 Highland Rd Ste B
Waterford, MI

Emerson Dankovich Company
(248) 244-8900
901 Wilshire Dr Ste 350
Troy, MI

Adapted From: Annuities For Dummies

Would you buy an insurance policy today that would cost you about one-fifth of your savings and pay you a guaranteed lifetime income starting at age 80 or so? If you died before age 80, you'd lose your original premium, but if you lived to age 85 or 90, you'd eventually get back much more than you paid up front.

What is described above is an advanced life deferred annuity, or ALDA. On the surface, this might seem like a bad investment, but it's not really an investment at all. Instead, it's insurance against the risk that you'll live longer than you can afford to. Indeed, actuaries and economists call it longevity insurance.

You've probably never heard of ALDAs. So far, only a few insurance companies sell them. But they're worth considering. In addition to removing your fear of running out of money in retirement, they can make retirement planning easier. They can even make spending money in retirement more fun.

How ALDAs work

In an unadulterated ALDA, you give a portion of your retirement savings — 10 to 25 percent — to an insurance company in return for a guaranteed specific monthly income starting at whatever age you choose — 75, 80, or 85 years.

The earlier you pay for the contract, the better, because your premium will have time to earn in the carrier's coffers and buy you more income later. The later you start receiving payments, the more income you'll get each year, simply because you'll collect your benefits for fewer years.

How ALDAs save you money

What ALDAs lack in cash value, they make up for in insurance value. You can guarantee yourself much more income at age 80 or 85 by buying an ALDA than by self-insuring — that is, by under-spending or setting up a rainy-day fund that you can use "just in case" you live longer than you expect.

Here's a comparison of the two strategies:

With self-insuring, you might set aside your own personal old age fund at age 60.
For instance, if you put $23,700 in reserve at age 60 and invested it in bonds paying 5 percent per year, you'd have about $80,000 by age 85. You could then buy an annuity that paid $1,000 a month for life. If you died before age 85, your heirs would get the entire reserve.
With an ALDA, you'd pay only about $16,000 (according to one company's quote) at age 60 for a lifetime income of $1,000 starting at age 85. That's a savings of $7,700.

Why is the ALDA cheaper than self-insuring? For the same reason that homeowner's insurance is cheaper than paying for damage to your home: because most homeowners never file a claim, and their premiums are used to reimburse the few who do. Similarly, the premiums of the ALDA owners who don't reach age 85 — and never file a "claim" — go to pay for the ones who do.

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For Dummies is a registered trademark of Wiley Publishing, Inc. in the United States and other countries. Used here by license.

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