Brad Rhodes: Who gets your pension money if you die? – Salisbury Post

Brad Rhodes: Who gets your pension money if you die?

Posted at 12:00 p.m. on Sunday, September 11, 2022

If you buy an annuity and die, the insurance company keeps your money. We have all seen and heard this general statement. Is it true?


Here’s a secret about insurance companies that puts everything into perspective. Insurance companies do not make decisions based on individuals; they make decisions based on a large number of people.

Their tool? The Commissioners Standard Ordinary Mortality Table, known as CSO. The statistical table allows insurance companies to know precisely how many people in a specific age group will die nationwide. It’s not a guess, and it’s pure science.

This table is so important because it allows insurance companies to set rates for calculating pension benefits for anyone at any age.

For example, let’s assume that a 65-year-old man with $100,000 in a retirement account could receive $600 a month for life. Insurance companies know precisely statistically how many 65-year-old men will live and die each year; they also know that the life expectancy of a 65-year-old man is 20.5 years.

What if a 65 year old lives to be 100? What happens to the retirement funds placed in the annuity? Did it stop at his life expectancy? (85.5 years old) No, it continued until his death. Lifetime annuity payments are fully guaranteed and the insurance company will continue to pay and pay and pay.

How can they do that? Knowing how many 65-year-old men will die each year would mean that another group of 65-year-olds did not live to life expectancy.

This is called the law of large numbers.

The man who died prematurely, did the insurance company keep their unused funds? No, any remaining funds for anyone who died prematurely will be returned intact to the annuitants named as beneficiaries. All that the instance company does is the additional return of the initial deposit; no insurance company will ever profit from death.

So what is the lie? Those who do not understand how an annuity works or a competitor in the annuity industry will use half-truths to gain a competitive advantage over a prospect who is not fully informed.

Annuities mean guarantees, which can mean income for life without fear of losing the pension benefit. Annuities should be considered when planning the foundations of your retirement plan. They add guaranteed income to your Social Security benefits and retirement income to form the basis of your retirement.

In addition, avoid any cost or delay in transferring the value of your pension upon your death to whomever you want; name a beneficiary; It’s easy.

Brad Rhodes is a member of the Syndicated Columnists. He lives in Lexington.

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