Navigating Annuity Purchase at Age 90
For many seniors, the prospect of securing a guaranteed income stream is a top priority. Annuities are contracts with an insurance company designed to provide just that, but when you are 90 years old, the landscape for these financial products shifts. The good news is that no federal or state laws prevent you from purchasing an annuity. The actual constraints come from the insurance companies themselves, which manage their risk exposure by setting their own age limits.
Most providers set maximums for immediate or fixed annuities, often around 85 or 90, but some might extend this to 95 or even 100. For a 90-year-old, this means options might be more limited than for someone in their 70s, but they are not non-existent. The specific type of annuity is a critical factor in determining eligibility and potential benefits.
The Case for an Immediate Annuity
At 90, the most viable and frequently considered option is a Single Premium Immediate Annuity (SPIA). Unlike deferred annuities that accumulate value over a long period, an SPIA is purchased with a single, lump-sum premium and begins paying out income almost immediately, typically within one month to a year.
The most significant advantage of an SPIA at this age is the high payout rate. Since the insurance company bases payments on the annuitant's life expectancy, a shorter actuarial life means higher monthly income. This can be a compelling solution for someone seeking to supplement Social Security or other retirement income with a predictable and substantial cash flow for the remainder of their life. For instance, a 90-year-old might receive a significantly higher monthly payment than a 70-year-old for the same premium, reflecting the shorter expected payment period.
Understanding the Risks and Considerations
While the prospect of a high, guaranteed income is attractive, buying an annuity at 90 is not without its risks and trade-offs. The primary concern is longevity risk—the risk that the annuitant may not live long enough to receive the full value of their initial premium back. If the annuitant passes away shortly after purchasing a life-only annuity, the remaining balance is forfeited to the insurance company.
To mitigate this risk, many opt for a 'period certain' rider. A life with period certain option guarantees payments for a set number of years (e.g., 10 or 15) even if the annuitant dies, with the remainder going to beneficiaries. This lowers the monthly payout but provides a safeguard against early death. Another option is a joint and survivor annuity, which continues payments to a surviving spouse, though this also reduces the initial monthly payment.
Alternatives to Annuities for Seniors
Annuities are not the only, or always the best, option for securing income in your 90s. Other strategies, particularly for those with existing assets, can offer more flexibility or potential returns.
- Certificates of Deposit (CDs): For those seeking a safe, fixed-income investment, CDs offer a reliable interest rate and are FDIC-insured, though returns are typically lower than annuities.
- Bonds: Treasury bonds are backed by the federal government and offer bi-annual interest payments, providing a very low-risk income stream.
- Systematic Withdrawals: A disciplined withdrawal strategy from existing retirement accounts, like IRAs, can provide a steady income. However, unlike a lifetime annuity, the income is not guaranteed for life and could be depleted.
Comparison: Immediate Annuity vs. Other Income Sources at Age 90
| Feature | Immediate Annuity (at 90) | Certificates of Deposit (CDs) | Systematic Withdrawals (from IRA) |
|---|---|---|---|
| Income Guarantee | Guaranteed for life (with riders) | Principal and interest are FDIC-insured, but not for life | Not guaranteed for life; depends on balance |
| Payout Rate | Higher monthly payouts due to shorter life expectancy | Interest rates are generally lower and can be fixed or variable | Variable depending on investment performance and withdrawal strategy |
| Liquidity | Very low; surrendering the policy incurs substantial fees | Low; funds are locked up for the term; early withdrawal penalties apply | Highest; control over withdrawals, but risk of depletion |
| Inflation Risk | Payments are often fixed; purchasing power can erode over time unless an inflation rider is added | Fixed rates generally don't keep up with inflation | Returns can potentially keep up with inflation if invested wisely |
| Beneficiary | Payouts may cease on death, unless a rider is selected | Heirs receive remaining principal and interest | Remaining balance goes to beneficiaries |
The Importance of Expert Advice
For someone in their 90s, financial planning becomes acutely focused on income stability, longevity, and leaving a legacy. The decision to buy an annuity is complex, involving trade-offs that are highly personal. Because of this, consulting with a fiduciary financial advisor is crucial. A fiduciary is legally and ethically bound to act in your best interest, helping you weigh the pros and cons based on your unique health, financial situation, and long-term goals.
To learn more about what to consider when evaluating different annuity options and how to work with financial professionals, visit the Financial Industry Regulatory Authority's (FINRA) guide on annuities: https://www.finra.org/investors/investing/investment-products/annuities.
Conclusion
While you can buy an annuity at 90, the suitability of the product depends on your specific circumstances. A Single Premium Immediate Annuity can offer a welcome boost to your guaranteed income, but it's essential to understand the implications of liquidity, inflation, and how potential riders affect your monthly payout and legacy goals. Ultimately, making an informed decision requires careful consideration of all financial options, ideally with the guidance of an unbiased financial expert.
