Longevity Risk

Understanding Longevity Risk and the Role of Fixed Indexed Annuities (FIAs) in Mitigating This Risk

Longevity Risk is the potential financial risk that individuals may outlive their retirement savings. As life expectancy increases, so does the importance of planning for a longer retirement period. 

The chart above illustrates how life expectancy changes based on an individual’s current age and gender. As individuals age, their life expectancy increases. For example, while the life expectancy at birth in the United States was 76 years in 2021, a 60-year-old in the US can expect to around 83, and an 80-year-old can expect to live to 90. Additionally, females have a higher life expectancy than males throughout the age range shown. 

This shift in life expectancy at older ages highlights the need for robust retirement planning solutions to ensure financial security throughout retirement. A recent survey shows 60% of Americans are concerned about outliving their savings. With the projected increase in life expectancy over the next few decades, this concern is only expected to grow. 

Fixed Indexed Annuities (FIAs) as a Solution

FIAs are designed to provide principal protection, potential for growth, and a reliable income stream, which makes them an effective tool in addressing longevity risk. Here’s how FIAs can help: 

  1. Principal Protection: FIAs safeguard the initial investment against market downturns, which is crucial for retirees looking to preserve their capital. 
  1. Potential for Growth: FIAs offer the opportunity for growth based on the performance of selected indices without the risk of direct investment in the stock market. The interest credited will never be less than zero, ensuring that the contract value does not decrease due to market volatility. 
  1. Lifetime Income Options: FIAs provide various settlement options, including lifetime income, which guarantees a steady stream of income for the rest of the annuitant’s life. This feature is critical for managing longevity risk as it ensures retirees do not outlive their income. 
  1. Tax-Deferred Growth: Earnings within an FIA grow tax-deferred until withdrawals begin, allowing for a potentially greater wealth accumulation over time. 

Oceanview's Harbourview Fixed Indexed Annuity

Oceanview Life and Annuity Company offers the Harbourview Fixed Indexed Annuity, which exemplifies the benefits of FIAs. The Harbourview FIA offers: 

  • Guaranteed Principal and Diverse Crediting Strategies: The Harbourview FIA guarantees the principal and provides multiple crediting strategies tied to indices like the S&P 500 and Nasdaq-100. It also offers a fixed-rate option, offering both safety and growth potential to suit various risk preferences. 
  • Enhanced Flexibility: In addition to the standard 10% free withdrawal allowance after the first year, the Harbourview FIA offers a 20% free withdrawal option during the 30-day window following each contract anniversary, providing increased liquidity for unexpected needs. 
  • Comprehensive Rider Benefits: The Harbourview FIA includes riders like the Enhanced Nursing Home Confinement Rider, which doubles the free withdrawal allowance, and the Terminal Illness Rider, which waives surrender charges and market value adjustments. These riders provide additional financial security during critical times. 

To illustrate the potential benefits of the Harbourview FIA, let’s consider a hypothetical client, Sarah, age 60, who invests $100,000 in the Harbourview FIA with a lifetime income rider. Assuming a conservative 4% annual growth rate and no withdrawals, by age 85, Sarah’s contract value would have grown to approximately $266,500. If Sarah starts taking lifetime income payments at age 85, she could receive around $21,000 per year for the rest of her life, providing her with a reliable income stream to help mitigate longevity risk. 

Conclusion

Why Choose Oceanview? 

  • Strength: Oceanview has an “A” Excellent rating from A.M. Best, reflecting our stability and reliability. 
  • Transparency: We believe in clear, straightforward communication. Our products are easy to understand, helping you make informed decisions about your financial future. 
  • Competitive Rates: Our special introductory rates on select crediting strategies provide an added incentive to start your retirement journey with us. 
  • Supportive: Our dedicated team is committed to providing exceptional customer service and support throughout your retirement journey. 

Take the Next Step Toward a Secure Retirement

Financial professionals are encouraged to discuss the role of FIAs with their clients and explore how products like the Harbourview FIA can be integrated into comprehensive retirement plans to address longevity risk. Schedule a meeting with an Oceanview Life representative today to learn more about how the Harbourview FIA can benefit your clients.

To learn more or to schedule a meeting with an Oceanview Life representative, please contact:  

Oceanview Life and Annuity Company
(833) 656-7455

Disclosures:
This material is a general description intended for general public, educational use. Oceanview Life and Annuity Company is providing investment advice for any individual or in any individual situation, and therefore nothing in this should be read as investment advice. Please reach out to your financial professional if you have any questions. May
not be available in all states. Policy form numbers and provisions may vary. Rates are guaranteed depending on the guarantee period selected at policy issue. Within 30 days prior to the end of the Initial Interest Guarantee Period, we will send our contract holder a notification informing them the date the Guarantee Period is ending and provide the renewal rate and Surrender Charges in effect for the subsequent Guarantee Period. Excess withdrawals are subject to a Surrender Charge. The IRS may impose a penalty
for withdrawals prior to age 59 1/2. All annuity features, risks, limitations, and costs should be considered prior to purchasing an annuity within a tax-qualified retirement plan. Annuities issued by Oceanview Life and Annuity Company, 1819 Wazee St, 2nd Floor, Denver, CO 80202. www.oceanviewlife.com.

Oceanview Life and Annuity Company nor any of its representatives may provide tax or legal advice. While care was taken in compiling this information, the Company reserves the right to correct any typographical errors that may exist. In California, doing business as Oceanview Life and Annuity Insurance Company.

HARBOURVIEW ANNUITIES ARE PRODUCTS OF THE INSURANCE INDUSTRY AND NOT GUARANTEED BY ANY BANK NOR INSURED BY FDIC OR NCUA/NCUSIF. MAY LOSE VALUE. NO BANK/CREDIT UNION GUARANTEE. NOT A DEPOSIT. NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY. MAY ONLY BE OFFERED BY A LICENSED INSURANCE AGENT. GUARANTEES ARE SUBJECT TO THE CLAIM PAYING ABILITY OF THE ISSUING INSURANCE COMPANY.