How to help clients reduce longevity risk

Clock March 01, 2022


This article was originally published on April 21, 2021, and has been updated to reflect current sources.

After a lifetime of working, many seniors hope for, and have earned, a long and fulfilling retirement.

But more than 40% of seniors fear they will outlive their retirement savings.

The risk of outliving one’s assets is called longevity risk, and it is a real and growing concern for many people nearing or already living in retirement.

Fortunately, there are many financial planning strategies that advisors can deploy to help reduce longevity risk and the anxiety it can cause seniors.

One strategy is to regularly review clients’ life insurance policies.

Many clients who own life insurance policies are seeing significant premium increases for policies tied to an interest rate.

Although interest rates are on the rise, they continue to be historically low. The policies tied to these rates require new, higher premiums which were not anticipated when the policy was originated.

These increased premiums can reduce the policyowner’s liquidity, and/or deplete the cash value of the policy.

By reviewing clients’ policies annually, you can help them develop an informed understanding of the cost/benefit tradeoffs of maintaining the policy vs. canceling it, surrendering it, or exploring a life settlement.

Many seniors—and even advisors—are surprised to learn the average life settlement pays out 4x or more than a policy’s cash surrender value. These large life settlement payouts can dramatically reduce longevity risk in a retirement portfolio and provide clients peace of mind and long-term stability.

The first step in knowing if a life settlement is something that makes sense for a policyowner is to have their policy appraised. Appraisals are free, fast, and carry no obligation to sell the policy. Get started today—use the Life Settlement Estimate Calculator below to generate a free estimate.

For additional information about life settlements or to learn more about how Lighthouse Life helps advisors like you utilize the secondary market for life insurance, contact us today.

Life Settlement Estimate Calculator