annuity with long term care rider

What is a long term care annuity and should you get one?

Saving for retirement requires careful planning and commitment. And the earlier you start working towards making and saving money for retirement, the better. I mean, the last thing you want is to find that you don’t have enough savings to retire on.

But with the cost of living constantly rising and the fact that now people are living way beyond retirement age (65), it is important to have a steady income stream.

Why? Because your savings may not be enough for your retirement.

If you want to attain financial security, think about making an investment that brings in a steady income that will last a lifetime. And one such investment is called an annuity.

What is a long term annuity?

A long term annuity is a financial vehicle for accumulating money for retirement. This money is tax-deferred and that is what makes annuities so attractive.

There are two types of annuities:

  • Fixed – fixed annuities offer a fixed return rate
  • Variable – variable annuities offer a variable return rate

A fixed annuity has less risk than a variable annuity. This is because variable annuities offer multiple investment options.

When choosing an annuity, you can also choose an annuity based on how long you need to wait to collect your income. These annuities are classified under deferred or immediate.

Deferred annuities have an accumulation period, while immediate annuities do not.

The accumulation period is the length of time (usually in years) when you start making your premium payments and when you start receiving your income payments.

For example, if the accumulation period is 5 years. In those 5 years, your money will accumulate based on a fixed or variable return rate, depending on which one you choose. You will start to receive your income payments once this set period expires.

It should be noted that during the accumulation period, your annuity earns interest and continues to do so even after this phase is over. It does not matter whether your contract is variable or fixed, the annuity will continue to grow.

With an immediate annuity, you start receiving income a month after you purchase the policy. What you need to know about long term care annuities is that you stand to benefit a lot especially if you buy a rider.

A rider, in this case, is basically a benefit attached to the policy. Having an annuity with a long term care rider can be beneficial in that, thanks to the rider, you are guaranteed an income even when you are retired.   

Who needs a long term annuity?

Depending on your circumstances, you can choose whether to buy long term care annuity or not. However, there are circumstances where a long term annuity can be valuable.

When you find yourself in the following situations, consider getting a long term care annuity:

  • You have maxed out your 401k plan and other tax-deferred retirement accounts
  • You are not interested in the stock market
  • You want guaranteed income
  • You cannot get life insurance coverage
  • You want long term care protective cover

There may other reasons why you may want to get a long term care annuity. However, don’t let any insurance agent push you into getting one. This is an investment decision should be made based on what you want and not what the insurance agent is offering.

When do you get your annuity payouts?

If you plan on getting an immediate annuity, you will start receiving your income payments after one month. But with a fixed annuity, you’ll start receiving income payments once the set period (which is usually set by you) expires.

Where to get a long term care annuity

If you are considering getting a long term care annuity, it may maybe advisable to seek the services of a financial adviser.

A financial expert can help you determine which annuity is suitable for you by assessing your current income and other factors.  

But remember to do your homework as well. There are some key factors you need to look at before settling on a long term care annuity. These factors include:

  • Quality of service – go with an insurance company that has a good reputation in terms of quality of service. Many companies promise to provide high-quality services, but in reality, do the opposite.
  • Independent ratings – a number of organizations rate the financial stability of insurance companies. Some of these companies include Moody’s, A.M Best, Fitch, and Standard Poor’s.

You can go to these sites to see which insurance have the best or the highest ratings and this could help you make a more informed decision.

There are other factors that you may need to consider such as legal accreditation, customer service, locality, and price.

With that said, here are some of the top-rated insurance companies that provide long-term care annuity.

    • Mutual Omaha – A+ rating. Its tax-deferred long term annuity has an annual return rate of 12.6%.  
    • Lincoln Financial Group – A+ rating. Its deferred long term annuity has a return rate of 11.8% per annum.  
  • New York Life – A++ rating. The company offers long term annuity at a return rate of 11.5% per annum.


Buying a long term annuity can be beneficial especially if you don’t want to worry about money as a retiree. However, long term annuities are not for everyone and some financial experts don’t think they are a good investment option.  

Reasons why investing in a long term annuity may not be a good idea include:

  • Emergency money: If your long term annuity is still within the surrender period, that is the time period before your annuity expires, getting your money back will be a costly affair. If you need money right away for an emergency or something else, you may get penalized for withdrawing your money early.

So it’s advisable to ensure that you have some savings set aside for emergencies.  

  • Family. While some long term care annuities cover spouses and family members not all of them do.

Some people prefer not to purchase long term care annuities because they don’t want their money tied up in an investment for too long.

But when you really look at it, annuities can guarantee you a lifetime income. Which is important because you don’t want to retire and find that you don’t have enough in your nest egg to retire comfortably.

However, there are other investments that can also guarantee you a lifetime income. But consider this, with long term annuities, your income is not taxed. So you save more.

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