Budgeting for retirement... To make your money last

Concerned about running out of money after you retire? You're not alone. A poll released this summer found that 66 percent of Americans are very or moderately worried about having enough money for retirement.

The obvious challenges of planning for retirement is that you typically don't know how long you're going to live.

"If you spend too much in retirement, you risk running out of money, and if you spend too little, you could have maximized your lifestyle more."

Longevity insurance, also known as a deferred-income annuity, allows you to structure your investments to cover a specified amount of time after you retire.

Once you pass that period of time, payments from your longevity policy kick in, providing additional income as long as you're alive, she says.

Ease of planning

The typical person who benefits from longevity insurance buys a policy upon retirement at age 65 but doesn't start receiving the benefit until around age 85, says Lynn Ballou, a managing partner at Ballou Plum Wealth Advisors in Lafayette, California.

That age isn't set in stone – many companies will let you choose the time you start receiving income, even if you're in your 70s, she says.  But the general rule is that the longer you defer payment, the more income you'll bring in when you start receiving the benefit.

Your company can tell you what your income would be when you make withdrawals, so you can plan ahead, she says.

"Based on summer 2011 rates, if you're 65 and buy longevity insurance for $25,000 (with no death benefit), you can expect to receive an income of about $18,000 per year starting at age 85. If you buy $100,000 at age 65, your annual income at age 85 would be about $72,300."

"By contrast, if you buy an immediate annuity for $25,000 at age 65, you can start receiving money right away – but the annual income would only be about $1,770 (with 10 years of  guaranteed income)."

According to the CDC, life expectancy in the U.S. is 78.2 years.

For more information or to read more on this article go to http://www.insurance.com/life-insurance/coverage/longevity-insurance.html.

By Margarette Burnette