Longevity risk is the possibility that you live longer than your money was planned to last. Because many people underestimate their lifespan, planning only to an 'average' age can leave a gap in later years.
Tools that provide guaranteed income for life — such as immediate annuities or annuities with income riders — can address longevity risk by paying as long as you live, with payments backed by the issuing insurer's claims-paying ability and not FDIC insured.
Example
A retiree who lives to 95 relies on a lifetime annuity income stream that keeps paying long after a fixed withdrawal plan might have run out.
This definition is for general educational purposes only and is not financial, tax, or legal advice. Tim Hartle is an independent insurance professional. Annuity guarantees are subject to the claims-paying ability of the issuing insurance company and are not FDIC insured. Rules and product features vary by situation and by state. Please consult a qualified advisor about your own circumstances.