Advanced Life Deferred Annuities (ALDA)
Advanced life deferred annuities, also referred to as ALDA or pure longevity insurance, is a type of annuity. ALDA is not a typical investment, but is more of an insurance against a person's longevity. Typically, people who purchase an ALDA are older (50-60) and use 10-30% of their retirement savings to fund it. With an ALDA, these individuals are able to begin receiving guaranteed monthly income at the age of 80-85. The benefits of an ALDA is that it cover a person's depleted savings in case the investor lives past the capabilities of his or her savings account. Because the potential use of an ALDA is low (most people do not live long enough to take advantage of the benefits), insurance companies commonly offer ALDAs for a low price.
Although ALDAs may seem useless to most investors, statistically, the annuity has a high potential of benefiting the investor. On average, one member of a couple has a 75% change of living to age 85 and a 50% chance of living to age 90. With that said, one out of the two couples has a high chance of benefiting from an ALDA's monthly income.
However, the risks involved with an ALDA can also be substantial. If the both persons in a relationship die before the age of 85, the payments for the ALDA are forfeited. However, to increase the attractiveness of ALDAs, carriers typically offer case refunds to the deads' beneficiaries of the unpaid balance and provides death benefits to the said beneficiaries.