3-minute article

How fixed indexed annuities can help take the sting out of health care costs

Managing health care expenses can be a big challenge for some retirees. Fixed indexed annuities can help. They can provide a predictable source of income, which could be used to pay health insurance premiums or other costs as they arise.

Any way you look at it, a person's future health is one of retirement's biggest "unknowns." Because no one knows how well they'll age, it's hard to estimate how much they'll spend on insurance premiums, deductibles, prescription drugs and nursing care.

One thing is for sure, however. Whatever it costs today, it will cost more tomorrow. In fact, according to HealthView Services, a maker of health care cost projection software, health care costs are expected to rise about 4.9 percent per year for the foreseeable future.


Consider these total lifetime out-of-pocket cost projections for health care:

Retiring at age 65  Total Cost Future Value
Retiring at 65 $606,337
55-year-old couple $948,114
45-year-old couple $1,572,278

Health care costs include Medicare Parts B and D, Medicare Supplement Insurance Premiums, Dental Premiums, out-of-pocket expenses and inflation. Calculations assume that a healthy male and female will have life expectancies of 87 and 89 respectively, and take into consideration a combined future modified adjusted gross income.

Fixed indexed annuities can help manage the rising cost of care.

Managing health care costs without depleting assets can be a big challenge for some retirees. Fixed indexed annuities can help. They can provide a way to help manage expenses people know they'll have, while giving them the flexibility to meet future needs.

A "retirement paycheck" that's guaranteed for life
Lifetime withdrawals from an income or benefit rider can provide a guaranteed stream of income for predictable expenses like premiums, copays, dental and vision care. Keep in mind that rider payout factors increase with age, and the value of the benefit base typically increases the longer the contract is held.1

Protection and growth potential
A fixed indexed annuity's indexed crediting strategies earn interest based in part on the upward movement of a stock market index.2 The annuity's Accumulated Value is protected from loss due to market downturns. This combination of protection and growth potential can be important when considering costs that are likely to increase regardless of economic conditions.

Access to money with annual free withdrawals
Most fixed indexed annuities allow a yearly free withdrawal amount without having to pay a Withdrawal Charge or Market Value Adjustment where applicable.3 Required Minimum Distributions are IRS mandatory withdrawals and are generally considered part of the free withdrawal. Keep in mind that withdrawals in excess of the free amount will reduce a rider's Lifetime Income Withdrawal amount.

Confinement provisions
Most fixed indexed annuities offer confinement provisions, either as a waiver of withdrawal charges in the base contract or as a rider benefit. Rider benefits typically provide a significant increase in the Lifetime Withdrawal amount for a set period if certain conditions are met. While not the same as long-term care insurance, these provisions can help defray the cost of care in a nursing home or other Qualified Care Facility. Hybrid annuities that offer long-term care benefits are also available.

It’s important to consider all expenses as well as income and retirement goals. Annuities as a retirement savings solution can help people achieve the retirement they’ve always dreamed of.

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