To Life! (And Lifelong Income)
May 12, 2011
By Rachel Adelson
Four centuries back, folks in Colonial Virginia could expect to live maybe 25 years. They lived in houses with thatch roofs and starved all winter, but retirement savings? Not an issue.
Today, thanks to modern medicine and improved sanitation, people live a lot longer. In fact, the fastest-growing segment of the older population is people age 85 and up. Environmentally friendly behaviors may prolong life even further. People are quitting smoking, which lessens air and lung pollution and lowers life insurance rates. They’re biking or walking to work to get fit, which curbs carbon emissions and lowers their insurance premiums. And they’re starting to use more natural products, live in healthier spaces and eat more planet-friendly diets, all of which, along with exercise, may reduce rates of some cancers and chronic conditions.
Bottom line: as good, clean living turns into good, green living, people enjoy the benefits of extra time. But can they afford the extra years?
“We hear a lot of concerns about market volatility and very low interest rates when it comes to retirement planning,” says Derek Holmes, life sales analyst for Erie Family Life*. “People are worried—will their retirement funds be there for them?”
ERIE Agent Mike Langer helps Customers find the answer, in part through financial plans that include annuities. At Pfeffer Insurance Agency in Erie, Pa., Langer says he sees people putting more money into annuities than CDs (Certificates of Deposit) or savings accounts.
“Given the economy, annuities offer a minimum guaranteed interest rate that’s usually higher than what they can get with CDs,” says Langer.
Annuities are financial contracts with life-insurance companies that provide regular or lump-sum payments after an agreed-upon date, while allowing people to defer the taxes on the interest until that time. In retirement, people use fixed rate annuities to enjoy regular income, often at better rates than those offered by other investments, at little or no risk. Although annuities come in many flavors, such as fixed, variable and equity-indexed, the differences largely depend upon where and how the money is invested, and when and how you get it back.
People start looking at annuities around age 50, says Langer, as part of both pre- and post-retirement planning. “They start crunching the numbers,” he says. ERIE Agents can help by looking at the interest rates required to produce the needed retirement income and select annuity products that fit into a diversified portfolio.
“Everybody’s an individual,” says Langer, “and you have to see what’s best for your situation. Educate yourself and also set money aside for emergencies.” Holmes notes that people use annuities to cover fixed costs, even mortgage payments or nursing home bills.
Because annuities aren’t covered like bank accounts through the Federal Deposit Insurance Corp. (FDIC), Langer steers his customers only to top-rated insurance companies such as Erie Family Life*, which offers a family of three annuity products. ERIE is “a strong company,” he says. “I know they’re going to be there for my clients.”
Better health, longer life, greener lifestyle — and a greener bank account. As the colonists might say: Time for thanksgiving.
*Erie Family Life Insurance not available in New York.
Rachel Adelson writes about technology and the science of behavior from her office near Toronto.