|
Insurance Abstract
The present invention provides methods and systems for providing
longevity insurance by obtaining information useful for issuing
a longevity insurance contract for an individual, and determining
a premium or an income payment for the individual that are computed
based at least in part on an individual's age at a predetermined
date that income payments are deferred to. The longevity insurance
contract generally provides deferred income payments for a period
of time, such as for the life of the individual, beginning at a
predetermined date that is after an individual's anticipated retirement,
or at a predetermined date that is after the individual's life expectancy,
or on or after a specified birthday of the individual.
Insurance Claims
1. A method for providing longevity insurance comprising: obtaining
information useful for issuing a first insurance product and longevity
insurance in the form of a provision of the first insurance product
for an individual, the longevity insurance provision providing deferred
income payments for a period of time beginning at a predetermined
date that is after an individual's anticipated retirement date;
and determining one of a premium and an income payment for the individual
for the longevity insurance provision, the premium or income payment
computed based at least in part on an individual's age at the predetermined
date to which the income payments are deferred.
2. The method of claim 1, wherein the predetermined date is based
on the individual's life expectancy.
3. The method of claim 1, wherein the predetermined date is a fixed
number of years after the individual's anticipated retirement date
sufficient to provide a reduced premium for the longevity insurance
provision.
4. The method of claim 1, wherein the predetermined date is a date
at which the individual shall have accrued sufficient mortality
credits in a pooling arrangement to fund the income payments to
the individual.
5. The method of claim 1, wherein determining the premium for the
individual comprises determining an asset-based premium assessed
periodically against assets of the first insurance product.
6. The method of claim 1, wherein the premium or income payment
is computed based at least in part on a probability of the individual
outliving the predetermined date to which the income payments are
deferred.
7. The method of claim 2, wherein the premium is computed based
at least in part on a probability of the individual outliving his
or her life expectancy.
8. The method of claim 1, wherein the longevity insurance provision
is an optional rider to the first insurance product.
9. The method of claim 1, wherein the information useful for issuing
at least one of the first insurance product and the longevity insurance
provision is obtained with a profile interface screen that comprises
at least one form element for a user to specify the information.
10. The method of claim 1, comprising displaying a retirement income
needs interface screen that comprises at least one form element
for obtaining information regarding the individual's expenses.
11. The method of claim 10, wherein the information relating to
expenses comprises at least one of a group consisting of: healthcare
expense, a basic expense, and a discretionary expense.
12. The method of claim 1, comprising displaying an interface screen
that comprises at least one form element for obtaining information
regarding the individual's assets.
13. The method of claim 1, comprising displaying an interface screen
that comprises at least one form element for specifying information
regarding future investment plans.
14. The method of claim 1, comprising displaying an interface screen
that comprises at least one form element for specifying information
regarding anticipated growth rates for at least one asset class.
15. The method of claim 1, comprising projecting asset accumulation
for retirement based on at least one a group consisting of: information
regarding the individual's assets, information regarding future
investment plans, and information regarding anticipated growth rates.
16. The method of claim 1, comprising computing an anticipated
retirement cash flow for the individual and displaying an interface
screen that comprises the computed cash flow.
17. The method of claim 16, wherein anticipated retirement cash
flow accounts for at least one of a group consisting of: an annual
income needed, a tax free amount for year 1, a COLA amount, a start
date for income, a premium amount for the longevity contract, a
start date for the premium, and an end date for premium.
18. A method for providing longevity insurance comprising: obtaining
information useful for issuing a first insurance product and a longevity
insurance contract in the form of a provision of the first insurance
product for an individual, wherein the longevity insurance contract
provides deferred income payments for the life of the individual
beginning at a predetermined date that is substantially after an
individual's anticipated retirement date, and wherein the first
insurance product provides income payments for a period of time
up to the predetermined date; and determining one of a premium and
an income payment for the individual for the provision of the first
insurance product, the premium or income payment computed based
at least in part on a probability of the individual outliving the
predetermined date.
19. A method for administering longevity insurance comprising:
receiving at least one premium payment for a first insurance product
with a longevity insurance provision; tracking, with at least one
account, assets of the first insurance product comprising at least
a portion of premium payment; and assessing periodically a fee against
the assets of the first insurance product to cover a premium for
the longevity insurance provision, wherein the longevity insurance
provision provides deferred income for a period of time beginning
at a predetermined date that is after an individual's anticipated
retirement date.
20. The method of claim 19, wherein the predetermined date comprises
a date sufficient to provide a reduced premium for the longevity
insurance provision.
Insurance Description
[0001] The present application is a continuation-in-part application
of U.S. patent application Ser. No. 10/960,631, filed Oct. 7, 2004.
BACKGROUND OF THE INVENTION
[0002] This invention relates generally to retirement planning.
More particularly, the present invention relates to methods and
systems for managing assets and asset allocations to fund retirement.
[0003] Individuals often prepare for retirement by first determining
a desired retirement income and then preparing a plan to achieve
the desired retirement income, which generally can be anywhere between
40%-80% of the pre-retirement income, or more, based on the individual's
retirement goals and concessions, e.g., travel, new car purchases,
etc., for the life of the individual. Financial planning for retirement
is generally separated into two time periods: pre- and post-retirement.
During the pre-retirement phase, the individual's goal is to accumulate
sufficient assets, such as savings, investments, etc., to achieve
the desired retirement income. The post-retirement goals are to
manage the accumulated assets in order to generate a desired level
of income and to sustain an adequate level of income for the life
of the individual, which now can exceed 30 years beyond the individual's
retirement date.
[0004] Retirement financial planning is, consequently, uncertain
insofar as it is contingent in part upon the life of the individual,
and the two elements of the post-retirement goal work against each
other. For individuals who are not in a position to leave behind
a sizable estate, the uncertainty over how long the individual will
live invariably negatively impacts many individuals that are determined,
in retrospect, to have been either over protected for retirement,
e.g., they do not exceed their life expectancy, or under protected
for retirement, e.g., by exceeding their life expectancy. Over-protected
individuals generally spend less and/or save more than they may
otherwise have desired, either in the pre- or post-retirement time
periods, or both. The impact on under-protected individuals may
be more serious insofar as they may be forced to live with relatively
little income, e.g., Social Security alone, during many of their
years after retirement.
[0005] The assets accumulated for retirement may include cash,
securities, deferred annuities, such as fixed or variable annuities,
real and personal property, etc., which are generally drawn upon
for retirement income. These types of assets, however, provide the
finite source of income that either gets under withdrawn or underutilized
by the over-protected individuals or that gets depleted by the under-protected
individuals as explained above. Many individuals have addressed
uncertainty in this respect by using some of their retirement assets
once they reach retirement to purchase immediate annuities (annuitization)
that provide guaranteed income for life that begins immediately.
This product addresses both retirement goals by providing a reliable
source of income throughout retirement and by guaranteeing the income
will continue as long as the client lives, no matter how long that
may be. The amount of income paid from the immediate annuity is
generally based on the size of the investment, e.g., the purchase
price, the individual's age at the time of the purchase, gender,
interest rates, etc. For example, at the present time, a male individual
that invests $100,000 in an immediate annuity at the age of 65 with
a life expectancy of about 15 years can typically expect a yearly
income of about $8,000-9,000 depending on the interest rate.
[0006] Although immediate annuities prove to be a good value for
those who exceed their life expectancy, it can be, in retrospect,
a lesser value for those who do not live beyond their life expectancy.
Moreover, because immediate annuity payments begin immediately,
a sizable investment is required in order to derive a modest yearly
income. Many individuals who might otherwise benefit from the risk-reducing
benefits of immediate annuities find these aspects of immediate
annuities unappealing and therefore avoid immediate annuities altogether.
Moreover, many of these people also do not adequately manage their
assets and withdrawals to account for longevity, e.g., the very
real possibility of exceeding their life expectancy. Accordingly,
there is a need for investments for use in funding retirement that
better deal with the uncertainty associated with longevity, and
for methods to illustrate and protect against longevity risk (one
element of the post-retirement goal) that is split off from a "whole
retirement" income source (the other element of the post-retirement
goal).
[0007] In addition, some individuals who desire a product that
addresses both elements of the post-retirement goal, such as an
immediate annuity, may want to pre-fund such an income source in
order to take advantage of the time prior to retirement, when such
an income source can be built up through tax deferred savings, and
to take advantage of mortality credits that may accrue to pooling
such savings and making them available only to those in the pool
who reach retirement age, much in the way that corporate defined
benefit pensions have traditionally enabled individuals to build
up a retirement income during their working years. As such plans,
which were generally funded by employers as a benefit, are much
less prevalent than they were in the past, people may desire to
create their own "personal pension."
SUMMARY OF THE INVENTION
[0008] The present invention provides methods and systems for providing,
illustrating and administering longevity insurance. In one aspect
of the invention, a method for providing longevity insurance is
provided by obtaining information useful for issuing a longevity
insurance contract for an individual, and determining a premium
or an income payment for the individual that is computed based at
least in part on an individual's age at a predetermined date to
which income payments are deferred. The longevity insurance contract
generally provides deferred income payments for a period of time,
such as for the life of the individual, beginning at a predetermined
date that is after an anticipated retirement date for the individual.
In general, the income payments commence at or near a date which
is determined to maximize the retirement assets of the individual
which may vary depending on the individual's overall asset portfolio,
including available assets based on pooling arrangements. In some
embodiments, the income payments commence at or near the individual's
life expectancy, or a pre-determined number of years after the anticipated
retirement, such as 5 or 10 years after, or at a date which is sufficiently
after the anticipated retirement date to effect a reduced premium
for the longevity insurance contract.
[0009] In one embodiment, a personal pension provides deferred
income payments for a period of time, such as for the life of the
individual, and is funded pre-retirement and generally begins providing
income payments to the individual at retirement. Such a product
differs from longevity insurance insomuch as it provides an income
throughout retirement, much like an immediate annuity does; however,
it is similar to longevity insurance in that it is pre-funded by
the individual and it takes advantage of the mortality credits that
accrue to individuals who reach the date at which the income payments
begin that derive from pooling the individual risks.
[0010] In one embodiment, the premium or income payment is computed
based at least in part on a probability of the individual outliving
the predetermined date to which the income payments are deferred,
such as a predetermined date that is based at least in part on an
individual's life expectancy or a date, for example, on or after
an individual's seventy fifth birthday. The longevity insurance
contract may be limited to individuals who are less than or equal
to seventy-five years of age when the contract issues. In one embodiment,
premium payments are made on either a flexible or scheduled basis
for a duration that ends no later than the predetermined date to
which the income payments are deferred, such as when the individual
retires. In another embodiment, a single premium payment is the
only payment made before the predetermined date to which the income
payments are deferred, such as when the individual retires. A cost
of living increase may also be applied to the income payments.
[0011] In one embodiment, the longevity insurance contract is provided
without a surrender value, a death benefit, a reduced paid-up annuity
in the event of a lapse in scheduled or periodic premium payments,
or a combination thereof. In another embodiment, the longevity insurance
contract is provided with a reduced surrender value, death benefit,
a reduced paid-up annuity in the event of a lapse in scheduled or
periodic premium payments or a combination thereof. In another embodiment,
a mortality basis is used to compute the premium or income payments,
which is guaranteed for the life of the contract. In yet another
embodiment, the longevity insurance provides guaranteed payments
for a period certain (e.g., 5 years, 10 years, or years), either
with or without an accompanying lifetime guaranty. In another embodiment,
the longevity insurance contract is issued with a guaranteed minimum
crediting rate. In still another embodiment, the longevity insurance
is included within a deferred fixed or variable annuity as an additional
feature, which may be funded within the deferred fixed or variable
annuity policy.
[0012] In certain embodiments, the longevity insurance contract
provides fixed income benefits known at the time of purchase or
income benefits based at least partly on the performance of investment
options offered within the contract during the deferral period.
In one embodiment, the longevity insurance contract provides a fixed
income benefit based on the pricing in effect at the time of each
premium payment. In another embodiment, the longevity insurance
contract provides an income benefit based on the pricing in effect
at the time of purchase as well as the performance of investment
options offered within the contract during the deferral period.
In some instances, the percentage of each premium (e.g., 0% to 100%)
allocated to the variable product component is contractually determined.
Alternatively, a party to the contract (e.g., the policy owner)
sets the percentage of each premium (e.g., 0% to 100%) allocated
to the variable product component, with the balance going to the
fixed product component. Such an approach enables a party (e.g.,
the policy owner) to modulate market exposure during the deferral
period. In some instances, the contract offers a guaranteed minimum
income benefit during the payout phase using any number of approaches
(e.g., the income generated by the premium(s) allocated to the fixed
product component, or a pre-determined percentage of cumulative
premiums paid).
[0013] In another aspect of the invention, a method for administering
longevity insurance is provided by receiving a claim for deferred
income payments from an individual in accordance with a longevity
insurance contract, determining whether the longevity insurance
contract has matured, and distributing the deferred income payments
if the longevity insurance contract has matured. In this instance,
the income payments were computed based at least in part on the
probability that the insurance contract would mature, such as when
the individual outlives a predetermined date.
[0014] In some embodiments, the predetermined date is based at
least in part on an individual's life expectancy and the income
payment is computed based at least in part on a probability of the
individual outliving his or her life expectancy. In one embodiment,
the predetermined date is, for example, later than an individual's
seventy-fifth or eightieth birthday and the income payment is computed
based at least in part on the probability of the individual outliving
the predetermined date. In another embodiment, the longevity insurance
contract is limited to individuals who are less than or equal to
seventy-five years of age when the contract issues.
[0015] In one embodiment of the present invention, a retirement
planning tool is provided to perform methods of retirement asset
and income allocation assessments, demonstrations and recommendations.
In some embodiments, an overview of an individual's investment portfolio
is created reflecting retirement income and investment assets, risk
demonstrations and mitigation scenarios are demonstrated, and recommendations
are provided concerning an individual's assets incorporating some
degree of guaranteed lifetime income.
BRIEF DESCRIPTION OF THE DRAWINGS
[0016] Certain embodiments of the invention are illustrated in
the figures of the accompanying drawings which are meant to be exemplary
and not limiting, in which like references are intended to refer
to like or corresponding parts, and in which:
[0017] FIG. 1 is a flowchart of a method of providing longevity
insurance according to one embodiment of this invention.
[0018] FIG. 2a is a flowchart of a method of administering longevity
insurance according to one embodiment of this invention.
[0019] FIG. 2b is a flowchart of a method of administering a longevity
insurance provision according to one embodiment of this invention.
[0020] FIG. 2c is a flowchart of a method of administering a longevity
insurance provision according to another embodiment of this invention.
[0021] FIG. 3 is a diagram of a system useful for providing longevity
insurance according to one embodiment of this invention.
[0022] FIGS. 4-13 depict graphical user interfaces for use in providing
longevity insurance according to at least one embodiment of the
invention.
DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENTS
[0023] The present invention generally provides methods and systems
for providing longevity insurance, providing retirement income,
and/or enhancing retirement funding with longevity insurance. The
term longevity insurance is used herein to generally denote a product,
whether contractual or otherwise, that is designed to address the
inherent uncertainty associated with longevity, e.g., whether or
not an individual will outlive his or her life expectancy and/or
how long the individual will live, that makes retirement planning
difficult. Life expectancy may be based on mortality data or otherwise
selected for the purpose of computing longevity insurance variables,
such as a premium or income payments derived therefrom, as discussed
herein. Longevity insurance, therefore, includes, but is not limited
to, insurance contracts, annuities, securities, investments, etc.,
or a combination thereof, that generally provide a source of income
for at least a portion of retirement, e.g., a tail end of retirement
beginning at a predetermined date, such as a date at or near the
individual's life expectancy.
[0024] Referring to FIG. 1, a method for providing longevity insurance
according to one embodiment of this invention begins at step 102
with obtaining information, which is useful for issuing or otherwise
computing a premium or income payments in accordance with the longevity
insurance contract. The information may be obtained with the graphical
user interface screen shown in FIG. 4, which is described in greater
detail below. Insurance contracts may be purchased in various ways
and in various forms. For instance, a purchaser may specify a desired
premium that the purchaser is willing to pay and income payments
that begin on a predetermined date may then be computed or otherwise
determined based on the desired premium. The term premium is used
herein to denote the purchase price of an insurance contract, which
may be paid in one lump sum, a series of ad hoc payments. or a series
of periodic payments, such as monthly, semiannually, yearly, etc.,
whether as a direct charge or otherwise charges as a fee or deduction
against an account's assets or otherwise. Alternatively, the purchaser
may specify desired income payments to begin on the predetermined
date and one or more premiums may be computed or determined based
on the desired income payments. The desired income payments may
be obtained with the graphical user interface screen shown in FIG.
5, which is explained in greater detail below. The desired income
payments may also take into account the assets the individual has
or expects to have at the future date. The assets may be specified
with the interface screen shown in FIGS. 6-7. Accordingly, certain
items of information, such as the premium or the amount of the income
payments may be factored into or used as a basis for computing or
determining the premium or income payments, as the case may be,
and may therefore be necessary items of information.
[0025] The type of information that is useful for issuing the longevity
insurance contract, whether for computational purposes or otherwise,
may vary, and may include personal information regarding the individual
or individuals, information regarding variables or options associated
with longevity insurance, etc. Some or all of the information may
also be useful for issuing a first insurance product, such as an
annuity or any other type of investment, in combination with longevity
insurance as discussed below. Personal information generally identifies
the insured and may include the name, date of birth, age, address,
and gender of the insured or of the insureds, etc. Variables associated
with longevity insurance may include a desired income payment and
the duration of the income payments, which is usually for the life
of the insured or a desired premium. Additional variables may concern
premium payment options, such as whether there will be a single
premium payment, one or more ad hoc premium payments or periodic
premium payments (annually, monthly, etc.) and the extent to which
periodic premium payments vary in amount, the duration that premium
payments are to be made, e.g., up to an anticipated retirement age,
such as age 65, whether or not the premium payment period lasts
for the entire deferral period, or, in the event that premiums are
to be deducted from the assets of a first insurance product, when
the first insurance product ceases to be in effect. Still further
variables may include whether the insurance will be purchased as
a standalone or in combination with another product, the predetermined
date that income payments are to begin or be deferred, i.e., the
date the contract matures, such as at the date the individual reaches
75, 80, 85, 90, 95, etc, years of age, or generally any age that
is 75 or over, the probability that the individual will reach or
outlive the predetermined maturity date, the selection of an option
to advance or defer the maturity date, or whether or not annual
cost of living increases, e.g., of 3% or 5%, or any other type of
cost of living increase, should be applied to the income payments.
Other variables may include mortality variables, such as gender,
the individual's age at the time the contract issues, i.e., the
issue age, the individual's life expectancy, etc. Variables concerning
the selection of riders or other options may also be included, such
as a long term care rider, an annual increase option to provide
annual increases as a hedge against inflation, a changing needs
option to allow a policy owner to schedule, at the time of purchase,
future increases or decreases in the income payment amounts, or
an income enhancement option to allow a consumer concerned about
"locking in" lifetime income in a low interest rate environment
to enjoy an automatic increase in benefits if a benchmark index
is at least a certain number of percentage points (e.g., two) higher
at a particular future time (e.g., the fifth policy anniversary).
Any one or more of the variables discussed here may be used in combination
with other variables discussed here or otherwise.
[0026] As noted above, longevity insurance may be provided as a
stand-alone product or in combination with other products, e.g.,
as a provision of first insurance product, such as in the form of
a feature of the first insurance product, such as to a fixed or
variable annuity, deferred or otherwise, or in the form of a rider
to the first insurance product, where the features of the combined
product in some cases serve to fund different periods or stages
of retirement, e.g., to fund a period of time that includes time
before the predetermined maturity date and a period of time after
the predetermined date. For example, a variable or fixed annuity,
which can be either left to accumulate or drawn upon as needed to
provide income before the predetermined maturity date, may be combined
with longevity insurance, as described herein, which provides income
for life or for some other term that begins on or about the predetermined
maturity date of the contract. Regardless of whether the variable
or fixed annuity is left to accumulate or drawn upon for income,
the individual may beneficially derive a larger income stream, up
to the maturity date of the contract, from the individual's accumulated
assets (whether those assets are inside the first insurance product
or are other assets outside of the first insurance product) than
might otherwise be derived with an immediate annuity for a comparable
premium. Thus, if at step 103 longevity insurance is being purchased
in combination with a first insurance product, information relevant
to issuing the first insurance product, such as the type of the
first insurance product, e.g., a fixed or variable annuity, a maturity
date under the first insurance product, the desired income or premium
for the first insurance product, the duration of income payments
for the first insurance product, etc., may be obtained at step 105
and the pricing of the first insurance product, e.g., the computed
premium based on the desired payout or the computed payout based
on the desired premium, may be determined at step 107.
[0027] In some embodiments, the longevity insurance of the present
invention, whether as a stand alone product or as a provision of
a first insurance product, may be provided at a premium or cost
that is lower than that for than an immediate annuity providing
comparable income payments. The reduced premium may be achieved
in a variety of ways. In one embodiment, the premium is reduced
by deferring income payments to a maturity date that is substantially
after the individual's anticipated retirement date. In some embodiments,
this will be a date that is near or about the individual's life
expectancy. Alternatively, the income payments may be deferred until
a target maturity date or for a minimum waiting period that similarly
defers income payments such as 5 or 10 years after the anticipated
retirement date. In some embodiments the length of time after the
anticipated retirement date for the longevity insurance contract
income payments to begin will be a period of time that creates a
situation where the risk of uncertainty, e.g., that an individual
will outlive the predetermined date to which income payments are
deferred, is distributed among a group of insured individuals or
annuitants, such that the income payments for individuals that outlive
the maturity date of their contract are funded at least in part
by the premiums paid by those individuals that do not outlive the
maturity date of their contract. Premiums are reduced in this respect
since the risk or the probability of outliving a maturity date diminishes
the longer income payments are deferred for the individual. The
maturity date may be any time after the individual's anticipated
retirement, sufficiently after the anticipated retirement, e.g.,
when the individual reaches an advanced age, such as at the date
the individual reaches age 75, 80, 85, 90, 95, etc., or at about
the individual's life expectancy or some time thereafter. Similarly,
the maturity date may reflect a minimum waiting period that is,
e.g., 10, 15, 20, 25, 30, etc. years after issuance of the contract
or the individual's anticipated retirement.
[0028] The premium may also be reduced with longevity insurance
that is provided without a death benefit, a surrender value, a reduced
paid-up annuity in the event of a lapse in scheduled or periodic
premium payments, or a combination thereof, or with a longer premium
payment period. Alternatively, the longevity insurance may be offered
with a death benefit, a surrender value, a reduced paid-up annuity
in the event of a lapse in scheduled or periodic premium payments,
or a combination thereof. To accomplish a reduced premium with the
longer premium payment period, the longevity insurance contract
may be limited to individuals having a maximum issue age, e.g.,
75 years of age. Similarly, the maximum issue age may be limited
to an age that is, e.g., 5, 10, 15, 20, or 25 years, less than a
premium paid up date or age. For example, the maximum issue age
may be set at about 50 years of age in instances where the individual
elects to be paid up by the individual's income start date. This
way, if the date, for example, is the individual's retirement date,
then the individual has as much as 15 years to pay the premium,
assuming the individual elects to be paid up by age 65. Although
the longevity insurance is discussed herein as being based on the
life of a single individual, it is understood that longevity insurance
is equally applicable for a joint life payout and to lifetime payouts
with payment guarantees.
[0029] In some embodiments, the longevity insurance product is
offered for sale as an individual policy and in other embodiments
in a group structure or worksite environment. In an embodiment utilizing
a group structure or worksite environment, the cost is paid either
by the individual via automatic paycheck deductions, either pre-
or post-tax, from the employee's paycheck or it is paid by the employer.
In some embodiments, whether individual or group structured, the
premium(s) are paid with a single payment or with multiple scheduled
or unscheduled payments, or as asset-based charges deducted from
a pool of assets, such as the accumulation value inside a variable
annuity. In some cases, income benefits associated with premiums
paid are aggregated to provide a single periodic benefit and in
others are paid so that periodic benefits are associated with specific
premium payments.
[0030] Some or all of the variables associated with longevity insurance
may be specified by the insurer and may not therefore be subject
to negotiation or change. For example, the insurer may limit the
minimum maturity age or the predetermined date on which income payments
are to begin, such as to a date on or near the individual's life
expectancy, and/or may limit eligibility to a predefined group of
individuals, such as individual's having an age at issue of 75 or
less, etc. Similarly, the insurer may set the predetermined date
to reflect a minimum waiting period that defers income payments
for a period of time so set. Accordingly, in this instance, a determination
is made at step 104 whether the individual is an acceptable insured
based on eligibility requirements for the longevity insurance contract.
An insurer is used herein to denote the party offering and/or guaranteeing
the longevity insurance contract. The insurer may therefore be an
insurance company, a guarantor, an employer, a private party, agents
thereof, etc. In one embodiment, the longevity insurance contract
is made available to individuals that are, for example 75 years
old or less. In another embodiment, the longevity insurance contract
is made available to individuals at a minimum issue age that would
allow for at least 10 years of premium payments between the individual's
issue age and the premium paid up date or age. In this instance,
a determination is made at step 104 whether or not the individual
satisfies the age requirements for the contract.
[0031] At least one contract variable, such as a premium, income
payment, or any one of the other variables noted above, for the
longevity insurance contract may then be determined or computed
at step 110. In accordance with one embodiment of the present invention,
the premium or income payment is computed based at least in part
on the individual's age at the selected maturity date of the contract
or, more generally, the predetermined date to which income payments
are deferred. As noted above, the maturity date may be any time
on or after the individual's anticipated retirement at or near a
date which is determined to maximize the retirement assets of the
individual which may vary depending on the individual's overall
asset portfolio, including available assets based on pooling arrangements.
In some embodiments, the income payments commence at or near the
individual's life expectancy, or a pre-determined number of years
after the anticipated retirement, such as 5 or 10 years after, or
at a date which is sufficiently after the anticipated retirement
date to effect a reduced premium for the longevity insurance contract.
For example, assuming an issue age of 50 and a retirement age of
65, the maturity date may be any age or date on or after the individual
reaches age 65. To reduce the premium, the maturity age is preferably
an advanced age, such as the individual's life expectancy or the
date that the annuitant reaches age 75, 80, 85, 90, 95, etc., or
any age in between or thereafter. Similarly, the premium may be
reduced with a maturity date that reflects a minimum waiting period
that is, e.g., 10, 15, 20, 25, 30, 35, etc. years after issuance
of the contract or the individual's anticipated retirement. In one
embodiment, the policy owner has the flexibility to advance or defer
the maturity date provided the revised maturity date is after the
end of the minimum waiting period. In another embodiment, a target
maturity date serves in lieu of a minimum waiting period, providing
the policy owner with flexibility to choose, after policy issuance,
an actual maturity date that is sooner or later than the target
maturity date, and that would be a factor in determining an adjustment
to income benefits previously determined using the target maturity
date as a basis. In other embodiments, the mortality basis used
to compute the premium or the income payments at issue will generally
be guaranteed for the life of the contract. That is, the premium
and income payments will not change as a result of changes to mortality
variables, e.g., the individual's age, health condition, etc., or
as a result of changes to the insurer's mortality outlook, after
the contract issues. The contract variables may be computed individually
for each application for longevity insurance, or may computed for
a variety of circumstances and tabulated or stored in a database,
such as a contract variable database, that may be accessed, e.g.,
by an insurance agent or an employee of the insurer, at a later
date for determining the premium or income payment for a potential
payor based on the information provided. The computed contract variables
with or without the insured's accumulated assets may be shown graphically
or in a tabular format, as shown in FIGS. 8-13.
[0032] As noted above, longevity insurance may be provided as a
provision, such as a rider, to a first insurance product, such as
to a fixed or variably annuity, deferred or otherwise. In this instance,
the premium for the provision may be paid directly, e.g., via billing
or checking account deductions, or indirectly, e.g., as an asset
based charge on some or all of the value of the annuity, such as
0.30%, 0.35%, 0.40%, 0.45%, 0.50%, or some other percentage of the
annuity assets or a portion of the annuity assets, e.g., a portion
maintained in a separate account, or a premium-based charge on some
or all of the premium paid into the deferred annuity, such as 0.75%,
0.85%, 1.00%, or some other percentage of the deferred annuity premium
payment or a portion of the deferred annuity premium payment, e.g.,
a portion allocated to a separate account, assessed periodically.
The percentage may vary based on the information obtained, e.g.,
personal information, longevity insurance variables and options,
etc, as discussed herein. For example, a variable annuity that may
be drawn upon for income or allowed to accumulate may be offered
with a longevity insurance provision or rider that matures at age
80 and pays income for life for an additional 1.00% or any other
percentage per year of the variable annuity premium payment above
any Mortality & Expense (M&E) fee of, e.g., 1.5% per year
of the variable annuity assets or the variable annuity premium payment
A similar example is, a variable annuity that may be drawn upon
for income may be offered with a longevity insurance provision or
rider that matures at age 75 for an additional percentage of the
variable annuity assets or premium payment per year that is higher,
since the charges for the longevity insurance would be collected
for a shorter period of time. Alternatively, the percentage charge
for the longevity insurance may be the same for both of these cases,
with the amount of the longevity insurance benefit being greater
for the policy with the later maturity of the longevity provision
(reflecting the fact that such policy had the longevity charges
deducted for a longer period of time). The premiums may be flexible.
That is, the insured may be given an option to change how the premium
is paid initially, with or without the option to later change the
manner in which the premiums are paid. In one embodiment, the mortality
basis for a flexible premium contract may not be guaranteed, or
alternatively, the mortality basis is guaranteed but additional
premium amounts paid may be limited to a maximum percentage increase
relative to the initial premium or a series of premiums paid over
a specified time horizon.
[0033] The asset-based or deferred annuity premium-based fee will
generally be applied for the duration of the first insurance product
or up to the predetermined maturity date applicable to the longevity
insurance provision, as the case may be, or for a shorter period
of time. For example, an annuity that allows withdrawals may charge
the asset-based or deferred annuity premium-based fee beginning
after issuance of the variable annuity and ending at the predetermined
maturity date of the longevity insurance provision if the individual
outlives the predetermined maturity date. Thus, the asset-based
or deferred annuity premium-based fee will be charged against the
annuity for the duration of the annuity, including any accumulation
period for a variable annuity. In another embodiment, the asset-based
fee will be charged no for the duration of the annuity, but until
the pre-determined maturity date of the longevity insurance provision.
[0034] In one embodiment, the combination of the first insurance
product and the longevity insurance provision, e.g., rider, is treated
as two insurance products, such as a traditional deferred annuity
for accumulation, and longevity insurance, for a premium that is
charged at a rate based on the assets of the first insurance product
or a portion thereof or based on the premium payment that was paid
for the first insurance product or a portion thereof. In this way,
an annuitant may derive greater income from an annuity by limiting
the term of withdrawals taken from the annuity or from other pools
of assets to the predetermined maturity date of the longevity insurance.
Any uncertainty with regard to whether or not the annuitant will
outlive the predetermined date is covered by longevity insurance
that is, in many instances, less costly. For example, an individual
age 50 at issue may purchase a deferred annuity, which provides
income to the individual (e.g., via withdrawals) between ages 65
and 85, along with a longevity rider, which provides income payments
commencing on or about age 85 for life. The combination may therefore
be a used as personal pension product which may provide greater
income during retirement than other retirement funding options.
The terms of the products may also be flexible. That is, the income
may start at any age after, for example, age 60. If the income starts
at less than the maximum age for tax-qualified plans as determined
by the Internal Revenue Code, the pension may be able to be funded
with money that originated in a tax-qualified plan.
[0035] Guaranteed minimum income benefit riders (GMIB), which are
offered with many variable annuities, guarantee income payments
based on the purchase price of the variable annuity or the purchase
price grown at a fixed rate or reset periodically based on the policy's
growth, which is applied to income factors that are discounted with
an age set back or some other means, instead of being based on the
cash value of the annuity applied to standard income factors. They
purport to provide some degree of guarantee in the instance the
cash value is much less than the GMIB rider notional amount. For
example, assuming a variable annuity with a GMIB that was purchased
with $100,000 has a cash value of $50,000 at the time income payments
are to begin, the annuitant may annuitize the GMIB rider notional
amount (assuming 5% per year accumulation) of $163,000 using the
GMIB rider annuitization or income tables instead of the cash value
using standard annuitization tables. The GMIB rider tables, however,
typically apply an age set back or some other means of depressing
the payments, which results in income payments that may be less
than income payments computed using lower values applied to standard
income tables. For example, annuitizing $163,000 using GMIB rider
tables for life may be equivalent to annuitizing $110,000 using
standard income tables. In this respect, the amount of income derived
from variable annuities with GMIB riders may be less than expected.
Furthermore, in order to receive the income payments guaranteed
under the GMIB rider, clients must forfeit the value of the annuity.
[0036] Unlike annuities with GMIB riders, an insurance product
with longevity insurance may allow the holder to keep the cash value
of the variable annuity and any remaining accumulation value may
be accessed by the insured or, after the insured's death, may be
transferred to the insured's heirs. With regard to the above example,
assuming instead a cash value of $120,000, the annuitant that purchases
a variable annuity with the longevity insurance with income payments
of $1,000 per month commencing at the predetermined maturity date
may use the $120,000 cash value for a shorter period of time rather
than for life thereby providing greater income than would be derived
from an annuity with the GMIB rider. Additionally, the income provided
with the longevity insurance rider would be certain at $1,000 per
month at the time the annuity issues.
[0037] In one embodiment, pricing is derived at least in part based
on an income purchased (Income Purchased.sub.t) algorithm provided
in Appendix A. The income purchased is generally proportional to
the net premium (NP.sub.t) to be paid into the contract and the
crediting rate (i), and inversely proportional to the annuity factor
(.sub.n|a'.sub.x) for the longevity insurance payable beginning
at the maturity date of the longevity insurance. The annuity factor
is based on mortality data for the individual taking into account,
e.g., the probability that the individual will reach the longevity
insurance maturity date or the individual's age at which income
payments become payable, the individual's age at issue, etc. The
annuity factor may also take into account any cost of living increases,
as well as any other longevity insurance variable or option, such
as the individual's gender, premium payment options, the duration
that premium payments are to be made, etc. In one embodiment, longevity
insurance is provided with a guaranteed minimum crediting rate.
In this instance, each premium payment receives the greater of a
minimum contractual rate and the then current rate with respect
to computing the income purchased for the premium.
[0038] Once a premium, regardless of the, is computed, the longevity
insurance contract may be offered to the individual at step 112,
provided the eligibility requirements have been satisfied. Similarly,
if the longevity insurance product is provided as a provision, whether
as a rider or otherwise, to a first insurance product, the first
insurance product may also be offered to the individual at the computed
premium or income payment at step 112. If at step 114 the individual
does not accept the offer to purchase the contract(s), the information
obtained may either be saved, such as on the computer system described
below, for future reference or discarded, and one or more of the
steps described above can be repeated for the next potential purchaser.
If the offer is accepted at step 114, the longevity contract may
issue at the computed or determined premium along with or without
the first insurance product at step 116. The steps required to issue
a contract vary depending on the relationship between the individual
that obtained the information and the insurer. For example, where
the insurer or a party authorized to act on behalf of the insurer
obtained the information, the contract may issue automatically or
at some predetermined time thereafter, e.g., 30 days, etc. If, however,
the individual is an insurance agent with limited authority to bind
the insurer, the contract may issue only after first being reviewed
and accepted by the insurer. In any event, if the contract issues,
the information obtained, such as the personal information, longevity
insurance variables, etc., and any other relevant information are
stored at step 118 in an appropriate database, such as a longevity
insurance database.
[0039] In one embodiment, a two-tiered longevity insurance product
is provided that allows potential insureds to choose two or more
different income levels corresponding to two or more distinct phases
of retirement. Such flexibility will meet the demands of consumers
that might otherwise find a traditional single premium immediate
annuity's income stream too limiting. For instance, consumers may
wish to seek greater income while they are actively managing their
remaining investment portfolio during their early retirement years,
and then "step down" their income in their later years,
in lockstep with a decreased level of overall investment activity.
Others, by contrast, might wish to accept smaller guaranteed income
payments in their early retirement years, while they draw income
as needed from other sources, and then have their guaranteed income
"step up" in their later years, when they are less able
to manage their investment portfolio and expect to be more dependent
on guaranteed income payments. Consumers may also wish to match
their future income payments to the timing of their expected income
needs based on their expected lifestyle. For example, consumers
anticipating that they will be more active during their first twenty
years of retirement might elect a higher level of payment for those
years, and then "step down" their income level in their
later, less active retirement years. By contrast, consumers anticipating
greater income needs during their later retirement years may elect
to have their income "step-up" after several years. The
step-up percentage may be any percentage, preferably between about
1% and about 400%. The step-down percentage may similarly be any
percentage, preferably between about 1% and about 50%.
[0040] Referring to FIG. 2a, a method of administering longevity
insurance as a standalone product, in one embodiment, begins with
determining at step 200 that income payments should begin. The claim
is generally a request or demand, which is designed to give notice
to the insurer regarding an event that triggers income payments,
which is generally the maturity date of the contract. The claim
may be received from the annuitant in a variety of ways, including
a hard copy claim or an electronic version thereof. The claim will
then be tested at 202 with the limitations set forth in the longevity
insurance contract for which the claim is being exercised, and any
corresponding information related thereto. Testing the claim 202
generally denotes determining whether or not to begin income payments
in accordance with the longevity insurance contract.
[0041] In one embodiment, testing includes determining at 204 whether
or not one or more conditions, restrictions, or limitations that
do not cause the contract to lapse have been satisfied, such as
determining whether the contract has matured, e.g., whether the
individual has outlived the predetermined date when income payments
are to begin, etc. In another embodiment, testing includes determining
at 206 whether the contract is in effect or has otherwise lapsed.
This may occur, for instance, if scheduled premium payments, whether
or not asset-based, were discontinued during the premium payment
period.
[0042] If at step 204 the demand fails with regard to the conditions,
limitations, or restrictions set forth in the longevity insurance
contract, the claim will be denied at step 208 and the above steps
may be repeated for the next or subsequent claims. If at step 206
it is determined that the longevity insurance contract has lapsed,
a non-forfeiture payout (e.g., based on an applicable non-forfeiture
law), or other specified surrender value, may be made or commence
at step 212. For example, lower income payments may be made to individuals
whose policies lapsed during the premium payment period or who have
paid less than the full premium for longevity insurance. If the
claim passes the testing criteria, income payments may begin being
distributed at step 210.
[0043] Referring to FIG. 2b, a method of administering longevity
insurance as a provision or rider to a first insurance product,
in one embodiment, begins with determining at step 250 that income
payments under the first insurance product should begin. As stated
above, this determination could follow a variety of events, such
as a maturity date being reached or a claim being received from
an insured. If a claim is received, the claim is tested at 252 with
the limitations set forth in the first insurance product to determine
whether or not to begin income payments under the rider to the first
insurance product. In one embodiment, testing includes determining
at step 254 whether or not one or more conditions, restrictions,
or limitations that do not cause the contract to lapse have been
satisfied. For example, if the first insurance product is a deferred
annuity, a determination may be made as to whether the individual
has achieved the age when income payments under the longevity insurance
rider are to begin, which is likely to be some age on or after 75.
Similarly, if the first insurance product is an immediate annuity,
a determination may be made as to whether the premium has been paid.
In another embodiment, testing includes determining at step 256
whether the first insurance product is in effect or has otherwise
lapsed, which may occur if premium payments for the first insurance
product were discontinued during the premium payment period or if
the first insurance product was surrendered for its accumulation
value.
[0044] If at steps 254 or 256 the demand fails, the claim for income
payments under the longevity insurance rider to the first insurance
product will be denied at step 258 and the above steps may be repeated
for the next or subsequent claims, otherwise income payments may
commence under the first insurance product at step 260. As noted
above, the rider may be treated as a separate product and may thus
entitle the holder to rights there under whether or not the first
insurance product lapsed. Thus, even though a claim for income from
the first insurance product was denied at step 258, a claim for
income under the longevity insurance provision may be made at step
262 and a determination may be made as to whether the first insurance
product lapsed at step 266. If it is determined that the first insurance
product has lapsed, a non-forfeiture payout may be made or commence
at step 264 corresponding to the premium paid, e.g., in the form
of asset-based fees and/or scheduled or unscheduled premium payments
as discussed above, if the longevity insurance provision has matured.
Otherwise, if the first insurance product did not lapse, income
payments may begin being distributed at step 210 also providing
that the longevity insurance provision has matured. Where the first
insurance product has not lapsed, the income payments under the
longevity insurance provision may commence at the maturity date
of the longevity insurance provision with or without such a claim
for income payments.
[0045] Referring to FIG. 2c, upon issuance of the first insurance
product with the longevity insurance provision, the longevity insurance
provision may further be administered by periodically assessing
a fee based on the value of the assets of the first insurance product.
In this instance, the premium paid for the first insurance product
is received at step 278 and invested or otherwise tracked in one
or more accounts, e.g., a fixed account, an investment account,
or a combination thereof, at 280. At least initially, the premium
payment(s) will comprise the majority of the first insurance product
assets. Thereafter, the first insurance product assets reflect any
appreciation, depreciation, and additional premium payments, if
any, tracked in one or more accounts. Funds deposited into the fixed
account generally appreciate at a known rate, e.g., a fixed rate
or a variable rate based on an indicator, such as the prime interest
rate, whereas the separate account tracks particular investments
made with funds deposited therein. A fixed account may be used to
track assets under a fixed annuity, and a combination of a fixed
account and a separate account may be used to track uninvested and
invested assets, respectively, under a variable annuity. Similarly,
uninvested and invested assets may be tracked separately in the
same account.
[0046] The asset-based longevity insurance premium or fee will
generally be assessed periodically, such as annually, semiannually,
quarterly, etc., against or based on the assets of the first insurance
product at the time the fee is being assessed. In one embodiment,
the asset-based longevity insurance fee will be assessed against
the assets of the first insurance product periodically based on
the issue date of the first insurance product, such as on the anniversary
of the first insurance product. In this instance, the time from
the issuance of the first insurance product, e.g., the variable
annuity, may be tested to determine if the asset based fee, as well
as any other fee, such as the Mortality and Expense fee for a variable
annuity, should be assessed against the assets of the first insurance
product at step 284. If at step 286 the period for assessing the
fee is satisfied, the fee may be assessed accordingly, otherwise,
the system will test the time period at a later date.
[0047] The manner in which the fee is assessed will vary according
to the type of fee. For instance, where the fee is assessed as a
percentage of the first insurance product assets, a determination
may first be made regarding the value of the first insurance product
assets or an applicable portion thereof and the fee may then be
computed as a percentage of the value of the assets at step 288.
Where the fee is assessed based on the difference between a guaranteed
minimum interest rate and the actual interest or other earnings
earned from or based on the first insurance product assets, a determination
may similarly be made regarding the value of the first insurance
product assets or a portion thereof, and the earnings based on a
guaranteed interest rate may then be computed. Once determined,
the fee or the earnings may be applied to the first insurance product
assets at the computed values.
[0048] Referring to FIG. 3, a system useful in providing longevity
insurance according to one embodiment of this invention includes
a client interface 302 having a processor and associated computer
memory, a display device 306, and an input device 308. The client
interface 302 is at least one of a programmable calculator, or a
personal computer or special purpose computer having appropriate
software or otherwise designed to compute or assist in determining
the longevity insurance premium or an income payment according to
the methods described herein. The software may be installed locally
at the client interface 302, thereby enabling a user to input information
obtained regarding the insurance contract, and to determine a premium
for the insurance contract given a selected or specified income
payment, or to determine an income payment given a selected or specified
premium. The software may be proprietary software designed to provide
the methods described herein or, alternatively, commonly available
software, such as spreadsheet or a database programs, adopted to
perform the same. Longevity insurance may be sold in distribution
channels (e.g., insurance agents, broker-dealers, direct mail, and
the Internet) by any properly licensed individuals who may leverage
sales tools (e.g., software and paper-based tools), techniques (e.g.,
advertisements and seminars), or a combination thereof. The system
as described herein maybe therefore be made accessible to various
users, including brokers, agents, employees of the insurer, potential
insureds, potential payors, etc.
[0049] In an alternative embodiment, the client interface 302 is
communicatively connected to at least one server 314 over a communications
network 316, such as a local area network (LAN), a wide area network
(WAN), the Internet, the World Wide Web (WWW), a wireless network,
or a combination thereof. The server 314 includes at least one database,
such as a longevity insurance database 310. The longevity insurance
database 310 generally includes information obtained from individuals
that is useful for issuing the longevity insurance contract, such
as personal information, longevity insurance variables, longevity
insurance options, etc.
[0050] In one embodiment, the client interface 302 accesses the
relevant database or databases, stored locally at the client interface
302 or remotely at the server 314, for information necessary to
compute or otherwise determining the premium or the income payment
for the longevity insurance contract, and may update the relevant
databases accordingly. Similarly, the client interface 302 accesses
the longevity insurance contract database to test a claim for income
payments.
[0051] In one aspect of the invention, a retirement planning tool
is provided for computing one or more of the variables discussed
herein. The retirement planning tool may be implemented with software,
hardware, or a combination thereof to generally receive the requisite
information with one or more interface screens and display or otherwise
causes to be displayed one or more graphical user interface screens
that include the computed premium, income payments, anticipated
cash flows, etc., either in a graphical or textual form. The retirement
planning tool may be installed locally at a client interface as
described above, or in an alternative embodiment, the client interface
is communicatively connected to at least one server over a communications
network as described above.
[0052] In one embodiment of the present invention, a retirement
planning tool is provided to perform methods of retirement asset
and income allocation assessments, demonstrations and recommendations.
In one aspect a comprehensive view of the consumer's overall investment
portfolio is created that reflects retirement income and investment
assets as applicable, as well all other asset classes (e.g., stocks,
bonds, and mutual funds), if any. In some individual's assets according
to an enhanced database of historical rates of return for both equities
and fixed income securities. In another aspect the risk of an individual's
outliving his or her assets is demonstrated along with the ability
of guaranteed lifetime income products to address the identified
risk(s). In still another aspect recommendations are provided concerning
an individual's asset combination and configuration to facilitate
more adequate retirement income by incorporating some degree of
guaranteed lifetime income. In some embodiments, individuals are
able to prioritize asset withdrawal to determine in advance the
order of the withdrawals to be taken from their various assets within
the long-term withdrawal process.
[0053] Referring to FIG. 4, in one embodiment, the retirement planning
tool displays a profile interface screen that includes at least
one form element therein for receiving or otherwise obtaining information
relevant to issuing longevity insurance, a first insurance product,
or any other type of insurance product, such as the first and/or
last name of the potential insured, the date of birth, marital status,
and address. The information may be used further to generate a customized
presentation for the potential insured.
[0054] Referring to FIG. 5, in one embodiment, the retirement planning
tool displays a retirement income needs interface screen that includes
at least one form element therein for collecting information about
the client's, e.g., the potential insured's, expenses, such as healthcare
expenses and any other basic expenses or discretionary expenses.
The expenses may be actual recurring expenses or anticipated expenses
the potential insured expects to incur at a later date, e.g., after
retirement. The user may also provide an estimated annual inflation
rate for each of these types of expenses. This information is generally
collected in today's dollars, and may be used to calculate and display
the potential insured's anticipated cash flows during retirement.
At least one number for healthcare expenses, other basic expenses,
or discretionary expenses is preferably required information for
computing and displaying anticipated retirement cash flow.
[0055] Referring to FIGS. 6-7, in one embodiment, the retirement
planning tool displays an assets interface screen that includes
at least one form element for collecting information about a potential
insured's current assets, anticipated retirement income, or tax
rates, or a combination thereof. The interface screen may also include
form elements for specifying information about future investment
plans and anticipated deterministic growth rates for each asset.
This information may be used to project future asset accumulation,
and to estimate the total assets the insured has for retirement.
One or more of the following may be required for at least one asset
type: current balance, cost basis, annual investment, start month/year
(for annual investments), end month/year, annual increase (in annual
investments), and growth rate for at least one asset class. One
or more of the following may also be required for at least one income
type: monthly payment amount, taxable portion, annual increase,
start month/year, and end month/year.
[0056] Referring to FIG. 8, in one embodiment, the retirement planning
tool displays an interface screen that shows an insured's anticipated
cash flow in retirement based on the information provide with one
or more of the interface screens shown in FIGS. 4-7. The anticipated
cash flow is generally based on the total assets that will or are
expected to be accumulated for retirement according to deterministic
growth rates input on the assets page, as well as anticipated income,
and inflation-adjusted expenses, if any. By showing how an insured's
assets are drawn down in retirement until the insured runs out of
money, this interface screen enables users, such as insurance agents
and other sales professionals, to illustrate how the income from
retirement income insurance products can help clients meet their
retirement income needs. The chart provided by the interface screen
is preferably based on one or more of the following: annual income
needed, tax-free amount for year 1, cost-of-living adjustment amount,
start month/year for income, premium amount, e.g., for longevity
insurance, start month/year for premium, and end month/year for
premium. The interface screen may also include a drop-down menu
that enables the user to see how different scenarios impact the
insured's portfolios. For example, agents can choose to see a scenario
where the client experiences returns that are 10% more or less favorable
than the deterministic growth rates input on the assets page; or
the insured can see how his or her portfolio would have performed
if those designated as "equities" had grown according
to S&P 500 returns and those designated as "fixed income"
had grown according to the performance of U.S. Treasury bond returns.
[0057] Referring to FIG. 9, in one embodiment, the retirement planning
tool preferably displays an interface screen that shows anticipated
returns page adjusted to include the purchase of longevity insurance
as described herein, as well as other products, including a single
premium immediate annuity. One can observe that assets have been
reduced based on the cost of the products and the annual income
from the assets has been increased according to the anticipated
product benefits. Referring to FIGS. 10 and 11, the assets over
time in retirement interface screen may also show anticipated cash
flow in a scenario where the client experiences returns that are
10% more or less favorable than the deterministic growth rates input
on the assets page. Referring to FIG. 12, the assets over time in
retirement interface screen may also show anticipated cash flow
based on historic returns from 1966 to 2001 or any other year or
years of an index, such as the S&P 500. Referring to FIG. 13,
each of the results pages may also be displayed in a tabular format.
The tabular format preferably shows year-by-year values for: assets,
healthcare expenses, other basic expenses, discretionary expenses,
insurance product premiums, total expenses, guaranteed retirement
income, other recurring income, insurance product income, and total
income. The retirement planning tool also may show asset withdrawal
prioritization, which allows clients to determine ex ante the order
of the withdrawals to be taken from their various assets within
the long-term withdrawal process.
[0058] The retirement tool may display a presentation interface
screen that allows users, such as agents, to produce a personalized
retirement planning presentation for his or her client. This presentation
can include a summary of the data that was input into the retirement
planning tool, as well as the graphs and tabular output that was
produced based on that data. Further, the agent can customize the
presentation by choosing which graphs, charts, and concepts to include
for a particular client on a particular day.
[0059] While the invention has been described and illustrated in
connection with preferred embodiments, many variations and modifications
as will be evident to those skilled in this art may be made without
departing from the spirit and scope of the invention, and the invention
is thus not to be limited to the precise details of methodology
or construction set forth above as such variations and modification
are intended to be included within the scope of the invention.
APPENDIX A
Formulas for Longevity Insurance
[0060] Formulas NP t = GP t .times. ( 1 - PremTax ) - Policy .times.
.times. Free ; v t = ( 1 + i ) - ( t / 12 ) ; j t = .times. 0 .times.
if .times. .times. t < m = .times. truncation .times. .times.
( t - m 12 ) .times. if .times. .times. t .gtoreq. m ; p x ' = 1
- 1 - ( 1 - q x ) 1 / 12 ( 1 - q x ) 1 / 12 ; p x ' n = s = 0 n
- 1 .times. p x + s 12 ' ; n .times. | a x ' = s = n .infin. .times.
( v s ) .times. ( p x ' s ) .times. ( 1 + COLA ) j s ; IncomePurchased
t = NP t ( 1 + i ) - d / 365 .times. ( a x + t 12 ' ( m - i ) |
) ; and IncomePaid t = .times. ( s = 0 m - 1 .times. IncomePurchased
s ) .times. ( 1 + COLA ) j t .times. if .times. .times. t .gtoreq.
m = .times. 0 .times. if .times. .times. t < m where, [0061]
Issue Date=Date when initial premium is received; [0062] Maturity
Age=Age when income benefits will commence. The maturity age is
chosen at issue and cannot be changed; [0063] Income Start Date=Date
of the first income payment, which is the annuitant's birthday in
the year he/she attains the Maturity Age; [0064] x=Issue age of
annuitant; [0065] t=Number of complete months since Issue Date;
[0066] m=Number of complete months between Issue Date and Income
Start Date; [0067] j.sub.t=Number of complete years between time
t and Income Start Date; [0068] GP.sub.t=Gross Premium paid into
contract at time t; [0069] NP.sub.t=Net Premium paid into contract
at time t; [0070] COLA=annual % increase in benefit elected on Issue
Date; [0071] PremTax=State premium tax (varies by state); [0072]
IncomePurchased.sub.t=Amount of monthly income purchased by the
premium deposited at time t; [0073] IncomePaid.sub.t=Amount of monthly
income due at time t; Calc_Date=Calculation Date for Income to begin=m
months after Issue Date; [0074] d=Number of days between the Calc_Date
and the Income Start Date; [0075] i=annual crediting rate; [0076]
v.sub.t=Present Value of a dollar paid in month t based on a discount
rate of i; [0077] q.sub.x=Annual mortality rate for a person age
x; [0078] p'x=Monthly survival rate for a person age; [0079] p'x=Probability
that a person age x survives n months; and [0080] .sub.n|a'.sub.x=annuity
factor for an n-month deferred no refund life annuity payable to
a person age x;
|