The importance of annuities for the insurance industry
Guaranteed lifetime annuities are insurance products involving the payment of a lifelong pension until your death, in exactly the same way as the social security pension from the state.
Who is this calculator for?
This calculator is for anybody, regardless of their age, who wishes to know how much to save for their retirement or which pension they can buy at the age of 65. (If you are older than this, contact us).
What is the purpose of the calculator?
The purpose is to raise awareness among people who are interested in their retirement as to how much money they need to save in order to receive a guaranteed lifetime annuity when they retire or what their lifelong pension will be when they reach 65, with the savings they have.
Conceptos importantes para el cálculo de rentas vitalicias
This value refers to the percentage of annual adjustment of the lifetime annuity income aimed at mitigating the effect of inflation. In other words, today’s 500€ will not have the same purchasing power in a few years’ time.
For example, if the value for the annual pension revaluation is 2% and your lifelong pension is 1,000€ a month, in the second year this would increase to 1,020€ a month, the following year to 1,040.20€ a month, and so on until the moment of death.
This corresponds to the percentage of the monthly pension that your spouse would receive for life in the event of you dying before them.
For example, if the value is 50% and the pension that you are receiving at the moment of death is 1,020€ a month, your spouse would receive 510€ for as long as they live.
This refers to the interest on the annuity insurance product; at present, percentages are between 2% and 3%, depending on the insurance company.
The interest is the return on your savings.
We will work with the insurance company to obtain the best conditions for you without charging a commission.
The current situation is generating an annual interest rate for these insurance products of around 2% and 3%, a situation which has not occurred for quite a few years. Now may be a good moment to make this type of investment in guaranteed lifetime annuity products, as with the current interest rate you will obtain a higher pension with the same amount of savings or you will need to pay less for the same pension.
How to use the calculator?
At Quibus we wish to offer you 2 ways of calculating the lifelong pension that you could receive when you retire.
To this effect, we are going to show you the 2 options with examples:
Option 1: Calculation of the necessary capital for the monthly lifelong pension desired
In example 1, Andrés is 45 years old and he is married with 2 children. He is worried about the future in terms of his retirement income and savings. He also worries about how his wife will maintain her quality of life with his pension in the event of his dying before her.
Andrés would like to ensure that he has a pension of 1,000€ a month and that, in the event of his death, his spouse will receive this pension (100% of the amount).
Moreover, he would like the revaluation of his annual pension to be 1%.
As we can see by the result, Andrés will need to save a total of 245,987€ for the day he retires, in order to be able to buy a guaranteed lifetime annuity with these conditions.
In the event of Andrés dying at 85 years old, his spouse would receive a monthly pension of 1,220.19€ for the rest of her life.
Option 2: Calculation of the monthly pension received in return for the capital investment
In example 2, María is 65 years old, she is married and she has recently retired. She has savings and she would like to invest them in her retirement plan and receive a lifelong pension.
She currently has capital of 200,000€ that she can invest and she would like the revaluation to be 2%.
As we can see by the result, by making an investment of 200,000€, María will be able to receive a lifelong pension of 695€ a month with an annual revaluation of 2%.
You are going to live a long time
It should be kept in mind that in many case, the interested person will make the calculation depending on their life expectancy or the length of time they think they will live.
With this data they will have a parameter to compare whether having a guaranteed lifetime annuity is better than managing their own money or capital.
The main problem is that this comparison does not consider the possibility of living many more years than expected.
It should be remembered that life expectancy is increasing, that is to say, we live for more years on average (although it may seem like the opposite).
Here are some real examples, by way of reference:
To continue with example 2, María, who holds capital of 200,000€. If she managed her own money instead of investing in an insurance product, the result would be as follows:
With this capital, María would have 695€ a month with an annual revaluation of 2% for 18 years, 9 months and 15 days.
In other words, from the age of 83 years, 9 months and 15 days she would no longer have any savings.
If she dies before this, she would not have any problems if she manages the money herself. However, in the event of María dying at 100 years old, for the last 16 years and 3 months of her life she would have no savings.
Nevertheless, with the guaranteed lifetime annuity María ensures that she will have a monthly pension regardless of her age at the time of death.
If you want to obtain the life annuity simulator, do not hesitate to contact us. We will gladly provide it for you.