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Insurance Abstract
A method for providing retirement income using mutual fund longevity
insurance is provided. A current or prospective retiree can purchase
a mutual fund coupled with a longevity product. The longevity product
insures against the early exhaustion or termination of the mutual
fund, superannuation, or poor market performance of the mutual fund,
and could be funded using a qualified annuity, a Roth Individual
Retirement Annuity (IRA), or a non-qualified annuity to provide
tax advantages. Retirement income is provided for the retiree beginning
at retirement. During the life of the mutual fund, periodic withdrawals
are taken from the mutual fund and invested in the longevity product.
If the retiree reaches a threshold age, the retiree can choose to
receive income from the longevity product. Optionally, if the retiree
reaches the threshold age and sufficient income is available from
the mutual fund, the retiree can continue to receive income from
the mutual fund and delay receiving income from the longevity product
until a later age. Income from the longevity product can be provided
until the death of the retiree. A number of insurance options can
be provided, including a pure insurance option, a partial insurance
option, or a guaranteed payback option.
Insurance Claims
1. A method for providing retirement income for an individual comprising:
purchasing a mutual fund coupled with a longevity product; periodically
investing a portion of the mutual fund in the longevity product;
receiving income from the mutual fund to provide retirement income
when the individual retires; and receiving income from the longevity
product to provide retirement income when the individual reaches
a threshold age and until death.
2. The method of claim 1, wherein the step of purchasing the mutual
fund comprises purchasing a mutual fund with a management fee that
is less than average mutual fund management fees.
3. The method of claim 2, wherein the step of periodically investing
a portion of the mutual fund in the longevity product comprises
investing the difference between the management fee and the average
mutual fund management fees in the longevity product.
4. The method of claim 1, further comprising allowing the individual
to contribute to the mutual fund.
5. The method of claim 1, wherein the step of purchasing the mutual
fund coupled with the longevity product comprises purchasing a mutual
fund coupled with a non-qualified annuity.
6. The method of claim 1, wherein the step of purchasing the mutual
fund coupled with the longevity product comprises purchasing a mutual
fund coupled with a Roth IRA.
7. The method of claim 1, wherein the step of purchasing the mutual
fund coupled with the longevity product comprises purchasing a mutual
fund coupled with a qualified annuity.
8. The method of claim 1, further comprising paying taxes on the
portion of the mutual fund prior to periodically investing the portion
of the mutual fund in the longevity product.
9. The method of claim 1, wherein the step of receiving income
from the longevity product comprises receiving income from the longevity
product to provide retirement income until death when the individual
reaches the threshold age and the mutual fund is exhausted.
10. The method of claim 1, further comprising deferring income
from the longevity product until the individual reaches an age greater
than the threshold age prior to receiving income from the longevity
product.
11. A method for providing retirement income for an individual
comprising: purchasing a mutual fund coupled with a longevity product;
periodically investing a portion of the mutual fund in the longevity
product; receiving income from the mutual fund to provide retirement
income when the individual retires; receiving income from the longevity
product to provide retirement income when the individual reaches
a threshold age and until death; and returning a remaining balance
of the longevity product to an entity issuing the longevity product
at the death of the individual.
12. The method of claim 11, wherein the step of purchasing the
mutual fund comprises purchasing a mutual fund with a management
fee that is less than average mutual fund management fees.
13. The method of claim 12, wherein the step of periodically investing
a portion of the mutual fund in the longevity product comprises
investing the difference between the management fee and the average
mutual fund management fees in the longevity product.
14. The method of claim 11, further comprising allowing the individual
to contribute to the mutual fund.
15. The method of claim 11, wherein the step of purchasing the
mutual fund coupled with the longevity product comprises purchasing
a mutual fund coupled with a non-qualified annuity.
16. The method of claim 11, wherein the step of purchasing the
mutual fund coupled with the longevity product comprises purchasing
a mutual fund coupled with a Roth IRA.
17. The method of claim 11, wherein the step of purchasing the
mutual fund coupled with the longevity product comprises purchasing
a mutual fund coupled with a qualified annuity.
18. The method of claim 11, further comprising paying taxes on
the portion of the mutual fund prior to periodically investing the
portion of the mutual fund in the longevity product.
19. The method of claim 11, wherein the step of receiving income
from the longevity product comprises receiving income from the longevity
product to provide retirement income until death when the individual
reaches the threshold age and the mutual fund is exhausted.
20. The method of claim 11, further comprising deferring income
from the longevity product until the individual reaches an age greater
than the threshold age prior to receiving income from the longevity
product.
21. A method for providing retirement income for an individual
comprising: purchasing a mutual fund coupled with a longevity product;
periodically investing a portion of the mutual fund in the longevity
product; receiving income from the mutual fund to provide retirement
income when the individual retires; receiving income from the longevity
product to provide retirement income when the individual reaches
a threshold age and until death; returning a remaining balance of
the longevity product to heirs of the individual if the individual
dies at an age less than the threshold age.
22. The method of claim 21, wherein the step of purchasing the
mutual fund comprises purchasing a mutual fund with a management
fee that is less than average mutual fund management fees.
23. The method of claim 22, wherein the step of periodically investing
a portion of the mutual fund in the longevity product comprises
investing the difference between the management fee and the average
mutual fund management fees in the longevity product.
24. The method of claim 21, further comprising allowing the individual
to contribute to the mutual fund.
25. The method of claim 21, wherein the step of purchasing the
mutual fund coupled with the longevity product comprises purchasing
a mutual fund coupled with a non-qualified annuity.
26. The method of claim 21, wherein the step of purchasing the
mutual fund coupled with the longevity product comprises purchasing
a mutual fund coupled with a Roth IRA.
27. The method of claim 21, wherein the step of purchasing the
mutual fund coupled with the longevity product comprises purchasing
a mutual fund coupled with a qualified annuity.
28. The method of claim 21, further comprising paying taxes on
the portion of the mutual fund prior to periodically investing the
portion of the mutual fund in the longevity product.
29. The method of claim 21, wherein the step of receiving income
from the longevity product comprises receiving income from the longevity
product to provide retirement income until death when the individual
reaches the threshold age and the mutual fund is exhausted.
30. The method of claim 21, further comprising deferring income
from the longevity product until the individual reaches an age greater
than the threshold age prior to receiving income from the longevity
product.
31. A method for providing retirement income for an individual
comprising: purchasing a mutual fund coupled with a longevity product;
periodically investing a portion of the mutual fund in the longevity
product; receiving income from the mutual fund to provide retirement
income when the individual retires; receiving income from the longevity
product to provide retirement income when the individual reaches
a threshold age and until death; and returning a remaining balance
of the longevity product to heirs of the individual at the death
of the individual.
32. The method of claim 31, wherein the step of purchasing the
mutual fund comprises purchasing a mutual fund with a management
fee that is less than average mutual fund management fees.
33. The method of claim 32, wherein the step of periodically investing
a portion of the mutual fund in the longevity product comprises
investing the difference between the management fee and the average
mutual fund management fees in the longevity product.
34. The method of claim 31, further comprising allowing the individual
to contribute to the mutual fund.
35. The method of claim 31, wherein the step of purchasing the
mutual fund coupled with the longevity product comprises purchasing
a mutual fund coupled with a non-qualified annuity.
36. The method of claim 31, wherein the step of purchasing the
mutual fund coupled with the longevity product comprises purchasing
a mutual fund coupled with a Roth IRA.
37. The method of claim 31, wherein the step of purchasing the
mutual fund coupled with the longevity product comprises purchasing
a mutual fund coupled with a qualified annuity.
38. The method of claim 31, further comprising paying taxes on
the portion of the mutual fund prior to periodically investing the
portion of the mutual fund in the longevity product.
39. The method of claim 31, wherein the step of receiving income
from the longevity product comprises receiving income from the longevity
product to provide retirement income until death when the individual
reaches the threshold age and the mutual fund is exhausted.
40. The method of claim 31, further comprising deferring income
from the longevity product until the individual reaches an age greater
than the threshold age prior to receiving income from the longevity
product.
41. A method for providing retirement income for an individual
comprising: coupling a longevity product to a mutual fund; periodically
deducting a portion of the mutual fund for the longevity product;
disbursing funds from the mutual fund to provide retirement income
when the individual retires; and disbursing funds from the longevity
product to provide retirement income when the individual reaches
a threshold age and until death.
42. The method of claim 40, wherein the step of providing the mutual
fund comprises providing a mutual fund with a management fee that
is less than average mutual fund management fees.
43. The method of claim 41, wherein the step of periodically deducting
a portion of the mutual fund for the longevity product comprises
investing the difference between the management fee and the average
mutual fund management fees in the longevity product.
44. The method of claim 40, further comprising distributing remaining
funds in the longevity product in accordance with an insurance option.
45. The method of claim 44, wherein the step of distributing remaining
funds comprises allowing an entity issuing the longevity product
to retain the remaining funds.
46. The method of claim 44, wherein the step of distributing remaining
funds comprises distributing remaining funds to heirs of the individual
if the individual dies at an age less than the threshold age.
47. The method of claim 44, wherein the step of distributing remaining
funds comprises distributing remaining funds to heirs of the individual
at the death of the individual.
Insurance Description
BACKGROUND OF THE INVENTION
[0001] 1. Field of the Invention
[0002] The present invention relates to a method for providing
income for retirees. More specifically, the present invention relates
to a method for providing retirement income using mutual fund longevity
insurance.
[0003] 2. Related Art
[0004] Presently, many retirees are discovering that they are outliving
their retirement savings. This problem (referred to in retirement
planning as "superannuation") is particularly burdensome
where retirees are dependent upon defined contribution plans (e.g.,
401(k) plans), as opposed to defined benefit plans (e.g., pensions),
for retirement income. To avoid the risk of outliving retirement
savings, many retirees significantly reduce their standards of living
to extend the number of years that retirement savings will be available.
[0005] The immediate payout annuity represents a type of retirement
planning product that has in the past been used to supplement retirement
savings. With an immediate payout annuity, a purchaser liquidates
or "rolls over" accumulated assets to make a lump sum
annuity purchase. Annuity payments typically commence within one
year from the date of payment. For example, if a 65-year-old single
male desires to receive a monthly income of $3,000 for life with
payments commencing immediately, the lump sum cost of the annuity
using current pricing is approximately $430,000.00. However, immediate
payout annuities suffer from a number of disadvantages. For example,
many individuals are unwilling to relinquish control of large sums
of investable assets by rolling over such assets into a single annuity.
Further, by rolling assets into a single fixed annuity, the ability
to participate in financial markets is eliminated, thereby precluding
potential gains that could result had the assets been invested in
such markets. Further, immediate annuity purchasers are at the mercy
of market conditions at the time of purchase.
[0006] Other retirement planning approaches include structured
withdrawals that are targeted to match a retiree's life expectancy
and periodic fixed-dollar withdrawals that do not detract from principal.
However, statistical analysis has projected that structured withdrawals
are estimated to fail approximately 50 percent of the time for longer
retirements, depending on assumed investment returns and expenses.
Further, although periodic fixed-dollar withdrawals fail less frequently
than structured withdrawals, failures still occur and it is often
difficult for the retiree to properly know how much he or she can
spend in the future.
[0007] Many individuals assume that they will not reach older ages
in retirement, thus obviating the need to provide for retirement
income at advanced ages. However, recent longevity statistics show
that a large number of retirees will reach ages of 90 or older.
For example, a 65-year-old woman has a 40 percent chance of living
to age 90, a 20 percent chance of living to age 95, and a 5 percent
chance of living to age 100. For married couples where both spouses
are 65 years old, at least one of the spouses has a 57 percent chance
of living to age 90, a 28 percent chance of living to age 95, and
a 7 percent chance of living to age 100. Further, with future advances
in medical science, life expectancies will most likely increase.
Thus, there is an increasing need to provide retirement income at
advanced retirement ages.
[0008] Longevity insurance has in the past been proposed as a potential
solution for providing retirement income at advanced ages. Longevity
insurance is provided in the form of an advanced-life delayed annuity
that is adjusted for consumer price inflation. With this approach,
the annuity is acquired at a young age and small premiums are paid
over a long period of time. Inflation-adjusted income is provided
at an advanced age (e.g., ages 80, 85, and 90). However, this approach
does not couple the annuity with another product, such as a mutual
fund, so that income from the mutual fund and investment gains produced
by the mutual fund are automatically invested in the annuity for
later use. Moreover, the conventional longevity insurance approach
does not provide sufficient flexibility for distribution of assets
after the death of the retiree, nor does conventional longevity
insurance provide a mechanism for insuring against the early exhaustion
of a retirement assets.
[0009] Accordingly, what would be desirable, but has not yet been
provided, is a method for providing retirement income using mutual
fund longevity insurance, wherein income for retirees is guaranteed
at advanced ages and the potential is provided to accumulate wealth
with equity and/or fixed income mutual funds.
SUMMARY OF THE INVENTION
[0010] The present invention provides a method of providing retirement
income using mutual fund longevity insurance. A mutual fund coupled
with a longevity product is purchased by a current or future retiree.
The longevity product insures against the early exhaustion or termination
of the mutual fund, superannuation, or poor market performance of
the mutual fund, and could be a qualified annuity, a Roth Individual
Retirement Annuity (IRA), or a non-qualified annuity to provide
tax advantages. Income is provided from the mutual fund at retirement
(e.g., age 65). Periodic deductions are taken from the mutual fund
and invested in the longevity product. If the retiree reaches a
threshold age (e.g., age 80), the retiree can choose to receive
income from the longevity product. Optionally, if the retiree reaches
the threshold age and sufficient income is available from the mutual
fund, the retiree can continue to receive income from the mutual
fund and delay receiving income from the longevity product until
a later age. Income from the longevity product can be provided until
the death of the retiree.
[0011] The present invention provides a method for providing retirement
income for an individual. The method comprises the steps of purchasing
a mutual fund coupled with a longevity product; periodically investing
a portion of the mutual fund in the longevity product; receiving
income from the mutual fund to provide retirement income when the
individual retires; and receiving income from the longevity product
to provide retirement income when the individual reaches a threshold
age and until death.
[0012] In one embodiment, the present invention provides a method
for providing retirement income for an individual, comprising the
steps of purchasing a mutual fund coupled with a longevity product;
periodically investing a portion of the mutual fund in the longevity
product; receiving income from the mutual fund to provide retirement
income when the individual retires; receiving income from the longevity
product to provide retirement income when the individual reaches
a threshold age and until death; and returning a remaining balance
of the longevity product to an entity issuing the longevity product
at the death of the individual.
[0013] In another embodiment, the present invention provides a
method for providing retirement income for an individual, comprising
the steps of purchasing a mutual fund coupled with a longevity product;
periodically investing a portion of the mutual fund in the longevity
product; receiving income from the mutual fund to provide retirement
income when the individual retires; receiving income from the longevity
product to provide retirement income when the individual reaches
a threshold age and until death; and returning a remaining balance
of the longevity product to heirs of the individual if the individual
dies at an age less than the threshold age.
[0014] In another embodiment, the present invention provides a
method for providing retirement income for an individual, comprising
the steps of purchasing a mutual fund coupled with a longevity product;
periodically investing a portion of the mutual fund in the longevity
product; receiving income from the mutual fund to provide retirement
income when the individual retires; receiving income from the longevity
product to provide retirement income when the individual reaches
a threshold age and until death; and returning a remaining balance
of the longevity product to heirs of the individual at the death
of the individual.
[0015] The present invention also provides a method for providing
retirement income for an individual, comprising the steps of coupling
a longevity product to a mutual fund; periodically deducting a portion
of the mutual fund for the longevity product; disbursing funds from
the mutual fund to provide retirement income when the individual
retires; and disbursing funds from the longevity product to provide
retirement income when the individual reaches a threshold age and
until death.
BRIEF DESCRIPTION OF THE DRAWINGS
[0016] Other important objects and features of the invention will
be apparent from the following Detailed Description of the Invention
taken in connection with the accompanying drawings in which:
[0017] FIG. 1 is a flowchart showing the method according to the
present invention for providing retirement income using mutual fund
longevity insurance.
[0018] FIG. 2 is a flowchart showing an alternate embodiment of
the method of the present invention, wherein a pure insurance option
is provided.
[0019] FIG. 3 is a flowchart showing an alternate embodiment of
the method of the present invention, wherein a partial insurance
option is provided.
[0020] FIG. 4 is a flowchart showing an alternate embodiment of
the method of the present invention, wherein a guaranteed payback
option is provided.
[0021] FIG. 5 is a flowchart showing the method according to the
present invention for providing retirement income using mutual fund
longevity insurance, from the perspective of an insurance entity.
DETAILED DESCRIPTION OF THE INVENTION
[0022] The present invention provides a method for providing retirement
income using mutual fund longevity insurance. A current or prospective
retiree can purchase a mutual fund coupled with a longevity product.
The longevity product insures against the early exhaustion or termination
of the mutual fund, superannuation, or poor market performance of
the mutual fund, and could be funded using a qualified annuity,
a Roth Individual Retirement Annuity (IRA), or a non-qualified annuity
to provide tax advantages. Retirement income is provided for the
retiree beginning at retirement (e.g., age 65). During the life
of the mutual fund, periodic withdrawals are taken from the mutual
fund and invested in the longevity product. If the retiree reaches
a threshold age (e.g., age 80), the retiree can choose to receive
income from the longevity product. Optionally, if the retiree reaches
the threshold age and sufficient income is available from the mutual
fund, the retiree can continue to receive income from the mutual
fund and delay receiving income from the longevity product until
a later age. Income from the longevity product can be provided until
the death of the retiree. A number of insurance options can be provided,
including a pure insurance option, a partial insurance option, or
a guaranteed payback option.
[0023] FIG. 1 is a flowchart showing the method according to the
present invention for providing retirement income using mutual fund
longevity insurance, indicated generally at 10. Beginning in step
20, a mutual fund and a longevity product coupled with the mutual
fund are purchased by a current or future retiree. The mutual fund
could be purchased with a one-time, lump-sum payment, or it could
be funded through periodic payments over time. The longevity product
insures against the early exhaustion or termination of the mutual
fund, superannuation, or poor market performance of the mutual fund,
and could be funded using a qualified annuity, a Roth Individual
Retirement Annuity (IRA), or a non-qualified annuity to provide
tax advantages.
[0024] The longevity product could be offered in the form of an
insurance contact between a purchaser and an insurance entity. Income
is provided for the retiree from the longevity product when the
retiree reaches a threshold age (e.g., age 80). Preferably, the
mutual fund has management fees that are lower than average traditional
mutual fund management fees. For example, the Dryden S&P 500
mutual fund has a management fee of 65 basis points (0.0065%), and
the average management fee for a mutual fund is 160 basis points
(0.016%). The difference between the management fees and average
traditional mutual fund management fees can be invested in the longevity
product. The investment, however, can be more or less than this
difference. As such, the mutual fund is used to fund the longevity
product in a manner that is virtually unnoticeable to the retiree.
[0025] When the mutual fund and longevity product have been purchased,
step 25 occurs, wherein a portion of the mutual fund is periodically
deducted and invested in the longevity product. This investment
could occur at any desired interval, e.g., weekly, bi-weekly, monthly,
or as otherwise desired, and could occur automatically. The deduction
from the mutual fund can occur prior to or after a retiree's retirement
date, and invested in the longevity product. Preferably, taxes are
paid on the deductions prior to investment in the longevity product,
so that that the longevity product can grow tax-free. Optionally,
the purchaser can contribute to the mutual fund at any desired time.
[0026] In step 30, when the purchaser has reached retirement age
(e.g., age 65), funds are periodically withdrawn from the mutual
fund to provide retirement income. The withdrawals could occur on
a weekly, bi-weekly, or monthly basis, or as otherwise desired.
Then, in step 35, a determination is made as to whether the purchaser
has reached a threshold age, and whether the purchaser desires to
withdraw income from the longevity product. The threshold age could
be any desired age, such as age 80. Optionally, the purchaser could
choose to defer receiving income from the longevity product until
an age greater than the threshold age, in which case the value of
longevity product payments would increase. If a negative determination
is made, step 30 is repeated so that funds are periodically withdrawn
from the mutual fund. If a positive determination is made in step
35, step 40 occurs, wherein retirement income is received from the
longevity product until death. The income from the longevity product
could be provided in addition to income from the mutual fund. Importantly,
if the mutual fund has been exhausted and the retiree reaches the
threshold age, the longevity product provides income to the retiree
until death, thereby insuring against superannuation and/or exhaustion
of the mutual fund. Thus, retirement income is provided for retirees
at advanced ages.
[0027] FIG. 2 is a flowchart showing an alternate embodiment of
the method of the present invention, indicated generally at 100,
wherein a pure insurance option is provided. This option allows
income to be provided to a retiree at advanced ages and until the
retiree's death. At death, any remaining balance in the longevity
product is forfeited and retained by the entity responsible for
issuing and/or managing the longevity product, such as an insurance
company. Beginning in step 120, a mutual fund coupled with a longevity
product is purchased. When the mutual fund and longevity product
have been purchased, step 125 occurs, wherein a portion of the mutual
fund is periodically deducted and invested in the longevity product.
This investment could occur at any desired interval, e.g., weekly,
bi-weekly, monthly, or as otherwise desired, and could occur automatically.
Further, this investment could occur before or after a purchaser's
retirement date. Preferably, taxes are paid on the deductions prior
to investment in the longevity product, so that that the longevity
product can grow tax-free. Optionally, the purchaser can contribute
to the mutual fund at any desired time.
[0028] In step 130, when the purchaser has reached retirement age
(e.g., age 65), funds are periodically withdrawn from the mutual
fund to provide retirement income. The withdrawals could occur on
a weekly, bi-weekly, or monthly basis, or as otherwise desired.
Then, in step 135, a determination is made as to whether the purchaser
has reached a threshold age at which to start drawing income from
the longevity product, and whether the purchaser desires to receive
income from the longevity product. The threshold age could be any
desired age, such as age 80. Optionally, the purchaser could choose
to defer receiving income from the longevity product until an age
greater than the threshold age, in which case the value of longevity
product payments would increase. If a negative determination is
made, step 130 is repeated so that funds are periodically withdrawn
from the mutual fund. If a positive determination is made in step
135, step 140 occurs, wherein retirement income is received from
the longevity product until death. The income from the longevity
product could be provided in addition to income from the mutual
fund. Importantly, if the mutual fund has been exhausted and the
retiree reaches the threshold age, the longevity product provides
income to the retiree until death, thereby insuring against superannuation
and/or exhaustion of the mutual fund. Then, in step 145, any remaining
balance in the longevity product is forfeited at the retiree's death.
Any remaining balance in the mutual fund is passed to the purchaser's
heirs.
[0029] FIG. 3 is a flowchart showing an alternate embodiment of
the method of the present invention, indicated generally at 200,
wherein a partial insurance option is provided. This option is similar
to the pure insurance option discussed earlier with respect to FIG.
2, such that income is provided to a retiree at advanced ages and
until the retiree's death. However, at the retiree's death, the
balance of the longevity product can be passed to heirs of the retiree
only if the retiree's age at death is greater than a threshold age
(e.g., age 80). Beginning in step 220, a mutual fund coupled with
a longevity product is purchased. When the mutual fund and longevity
product have been purchased, step 225 occurs, wherein a portion
of the mutual fund is periodically deducted and invested in the
longevity product. This investment could occur at any desired interval,
e.g., weekly, bi-weekly, monthly, or as otherwise desired, and could
occur automatically. Further, this investment could be made before
or after a purchaser's retirement date. Preferably, taxes are paid
on the deductions prior to investment in the longevity product,
so that that the longevity product can grow tax-free. Optionally,
the purchaser can contribute to the mutual fund at any desired time.
[0030] In step 230, when the purchaser has reached retirement age
(e.g., age 65), funds are periodically withdrawn from the mutual
fund to provide retirement income. The withdrawals could occur on
a weekly, bi-weekly, or monthly basis, or as otherwise desired.
Then, in step 235, a determination is made as to whether the purchaser
has reached a threshold age at which to start drawing income from
the longevity product, and whether the purchaser desires to withdraw
income from the longevity product. The threshold age could be any
desired age, such as age 80. Optionally, the purchaser could choose
to defer receiving income from the longevity product until an age
greater than the threshold age, in which case the value of longevity
product payments would increase. If a negative determination is
made, step 230 is repeated so that funds are periodically withdrawn
from the mutual fund to provide retirement income. If a positive
determination is made in step 235, step 240 occurs, wherein retirement
income is received from the longevity product until death. The income
from the longevity product could be provided in addition to income
from the mutual fund. Importantly, if the mutual fund has been exhausted
and the retiree reaches the threshold age, the longevity product
provides income to the retiree until death, thereby insuring against
superannuation and/or exhaustion of the mutual fund.
[0031] In step 245, a determination is made as to whether the purchaser's
age at death is greater than the threshold age. If a positive determination
is made, step 250 occurs, wherein the remaining balance of the longevity
product is returned to the entity responsible for issuing or managing
the longevity product, such as an insurance company. If a negative
determination is made, step 255 occurs, wherein the balance of the
longevity product is passed to the purchaser's heirs. Thus, the
present invention provides a partial insurance option for the longevity
product, so that income is provided to the purchaser's heirs if
the purchaser dies before the threshold age. Any remaining balance
in the mutual fund is passed to the purchaser's heirs.
[0032] FIG. 4 is a flowchart showing an alternate embodiment of
the method of the present invention, indicated generally at 300,
wherein a guaranteed payback option is provided. This option is
similar to the pure insurance option discussed earlier with respect
to FIG. 2, such that income is provided to a retiree at advanced
ages and until the retiree's death. However, at the retiree's death,
the balance of the longevity product is guaranteed to pass to the
retiree's heirs regardless of the retiree's age at death. Beginning
in step 320, a mutual fund coupled with a longevity product is purchased.
When the mutual fund and longevity product have been purchased,
step 325 occurs, wherein a portion of the mutual fund is periodically
deducted and invested in the longevity product. This investment
could occur at any desired interval, e.g., weekly, bi-weekly, monthly,
or as otherwise desired, and could occur automatically. Further,
this investment could occur before or after the purchaser's retirement
date. Preferably, taxes are paid on the deductions prior to investment
in the longevity product, so that that the longevity product can
grow tax-free. Optionally, the purchaser can contribute to the mutual
fund at any desired time.
[0033] In step 330, when the purchaser has reached retirement age
(e.g., age 65), funds are periodically withdrawn from the mutual
fund to provide retirement income. The withdrawals could occur on
a weekly, bi-weekly, or monthly basis, or as otherwise desired.
Then, in step 335, a determination is made as to whether the purchaser
has reached a threshold age at which to start drawing income from
the longevity product, and whether the purchaser desires to receive
income from the longevity product. The threshold age could be any
desired age, such as age 80. Optionally, the purchaser could choose
to defer receiving income from the longevity product until an age
greater than the threshold age, in which case the value of longevity
product payments would increase. If a negative determination is
made, step 330 is repeated so that funds are periodically withdrawn
from the mutual fund. If a positive determination is made in step
335, step 340 occurs, wherein retirement income is received from
the longevity product until death. The income from the longevity
product could be provided in addition to income from the mutual
fund. Importantly, if the mutual fund has been exhausted and the
retiree reaches the threshold age, the longevity product provides
income to the retiree until death, thereby insuring against superannuation
and/or exhaustion of the mutual fund. Then, in step 345, any remaining
balance in the longevity product is passed to the heirs of the purchaser.
Any remaining balance in the mutual fund is also passed to the purchaser's
heirs.
[0034] FIG. 5 is a flowchart showing the method according to the
present invention, indicated generally at 400, for providing retirement
income using mutual fund longevity insurance, from the perspective
of an insurance entity. In step 420, an entity, such as an insurance
entity or any other entity, couples a mutual fund with a longevity
product. The mutual fund could be provided by the entity, or by
a separate entity. Then, in step 425, the entity periodically deducts
a portion of the mutual fund for investment in the longevity product.
Such periodic deductions continue until the purchaser reaches retirement
age (e.g., age 65), and could occur at any desired interval, e.g.,
weekly, bi-weekly, or monthly. Further, the investment could occur
before or after the purchaser's retirement date.
[0035] In step 430, at the retirement of a purchaser, the entity
periodically disburses funds from the mutual fund to the purchaser
to provide retirement income. The disbursements could occur at any
desired interval, e.g., weekly, bi-weekly, or monthly. In step 435,
a determination is made as to whether the purchaser reaches a threshold
age (e.g., age 80), and whether the purchaser desires to receive
income from the longevity product. Optionally, the purchaser could
choose to defer receiving income from the longevity product until
an age greater than the threshold age, in which the value of longevity
product payments would increase. If a negative determination is
made, step 430 is repeated so that periodic disbursements are continued
from the mutual fund to provide retirement income. If a positive
determination is made in step 435, step 440 occurs, wherein retirement
income is received from the longevity product until death. The income
from the longevity product could be provided in addition to income
from the mutual fund. Importantly, if the mutual fund has been exhausted
and the retiree reaches the threshold age, the longevity product
provides income to the retiree until death, thereby insuring against
superannuation and/or exhaustion of the mutual fund. At the purchaser's
death, step 445 occurs, wherein the entity terminates the longevity
product in accordance with an insurance option. The insurance option
could comprise the pure insurance option, partial insurance option,
and guaranteed payback option discussed earlier with reference to
FIGS. 2-4.
[0036] Having thus described the invention in detail, it is to
be understood that the foregoing description is not intended to
limit the spirit and scope thereof. What is desired to be protected
by Letters Patent is set forth in the appended claims.
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