The greatest risk in retirement is inflation eroding your spending power right? Wrong, your greatest risk is longevity. Simply put, how do you avoid outliving your money? How will your money grow, how much will you need to spend, how long will you live?
So how about that longevity contract? Unlike traditional annuities, distributions from longevity contracts typically do not begin until a relatively late age, usually 80 or 85. So if you live too long 😜 the longevity contract kicks in with extra income in your later years. For a variety of reasons these annuities are less expensive than traditional annuities.
You can get these contracts through a 401k plan or IRA, but the contracts must meet strict Treasury requirements. Final regulations (Treasury Regulations Section 1.401(a)(9)-6) explain those requirements.
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