Turn Your Retirement Balance Into a Real Paycheck: The Case for Longevity Insurance and How It Works

About This Blog

Paul Garofoli started his career in 1982 as an underwriter at the Paul Revere Insurance Company in Worcester, Massachusetts. He was 22. He is 66 now, and he has spent every year since inside one corner or another of the insurance business. Group medical. Individual disability. High-end life. And for most of the last stretch, annuities.

Somewhere in there, he became the guy other people in the industry go to when they need something explained in plain English.

Which is why, when he sits down to describe what an annuity actually is, he does not start with a product sheet. He starts with the Roman Empire.

"The origination of annuity comes from annum, the Latin term," he says. "Annuities go back as far as the Roman Empire, where the Caesar set aside money for retired soldiers so that they would have a standard of living after they retired."

Two thousand years later, most retirees in the United States are trying to solve the same problem the Romans were: how to make a paycheck last as long as a person does. And most of them, Paul says, are not being handed the tools that were built to solve it.

On this week's episode of Safe Money Radio, host Brett A. Blake sits down with Paul Garofoli, Regional Vice President of Individual Annuities at The Standard and a board member of the National Association for Fixed Annuities (NAFA). What follows is the retirement-paycheck conversation Paul wishes every 60-something got before they made a single call.

An Annuity Is Really Longevity Insurance  

The first thing Paul wants you to understand is that an annuity is a kind of insurance. But not the kind most people picture.

"Life insurance is very important if you die too soon," he says. "But an annuity is life insurance in that it helps you if you live too long."

That is the whole idea. Life insurance protects the people you leave behind if the timeline shortens. An annuity protects you if the timeline stretches. Paul calls it longevity insurance. It is designed to grow your money safely, protect you from losses, and then deliver income for a defined period or for the rest of your life, whichever you choose.

For a retiree looking at 25 or 30 years of income to fund, that second option is the part conventional planning is quietly weakest on. A portfolio has a balance. An annuity has a paycheck. The difference matters more the longer you live.

MYGA Versus Fixed Index Annuity in Plain English  

Two products come up most often, and Paul separates them cleanly.

A MYGA is a multi-year guarantee annuity. "The closest analogy is a CD," he says. "It is a fixed rate of return for a specific period of time. CDs are issued by banks. MYGAs are issued by insurance companies." Both are contracts. Both pay a fixed rate. The insurance version grows tax-deferred, which changes the picture for savers in higher brackets. Terms typically run 2 to 10 years. In today's rate environment, insurance carriers are offering competitive rates on 5-year MYGAs, though rates and product availability change frequently and vary by state.

A fixed index annuity is a different animal. Your principal is protected. You are not invested in the market. Instead, your credited interest is linked to the performance of an underlying index, like the S&P 500, by a formula spelled out in the contract. In an up year, you get a piece of the index gain. In a down year, you get zero. You do not lose money to the market, but you do not capture full market returns either.

"You will never lose money in a fixed index annuity," Paul says. "You will participate to some measure by formula in the growth of an underlying index."

Both products may or may not be suitable for a given retiree and are subject to state availability and individual suitability. The point is that the tools exist. Most people planning their own retirement have never had them explained without a sales pitch attached.

Insurance Companies Are Insurance  

Paul spends a moment on a question that comes up on almost every call. Are annuities FDIC insured?

They are not. Banks carry FDIC coverage because regulators require it, on the theory that banks can fail. Insurance companies are structured differently.

"Insurance companies are insurance," Paul says. "You already have insurance. You do not have to rely on the federal government to manage the insurance. You have insurance companies with billions of dollars of assets backing the promises in the contract."

The guarantees in an annuity are backed by the claims-paying ability and financial strength of the issuing carrier. That is why carrier ratings matter. Working with a licensed insurance professional who can walk you through those ratings before you sign anything is the right move.

Live On, Leave On  

The framework listeners will remember is Paul's live-on / leave-on idea.

Some of the money you have is meant to live on. It funds your own retirement. Some of it is meant to leave on. It is destined for someone else, a child, a grandchild, a church, a charity. Product does not decide which is which. Intent does.

Paul describes watching his own mother do this at her kitchen table, sorting accounts by who each one was for. A stock she owned was not "growth money." It was for a specific grandson. That is a leave-on asset, wearing a stock's clothes.

"It's what your intent is with that," Paul says.

Once you have sorted your money by purpose, the product conversations get simpler. Live-on money asks for stability and cash flow. Leave-on money asks for leverage and clean transfer. Same person, two very different jobs.

Polly's Plan  

Paul's personal plan is what he calls Polly's Plan, and it is a study in how a 44-year insurance veteran actually builds his own retirement income floor. The order matters.

First, know your expenses. Second, identify every source of guaranteed income you have. In Paul's case, that is a frozen pension from a previous employer, Social Security scheduled to start at 67, dividend-paying stocks, and a deferred index annuity that will convert into contractual income the longer he waits to turn it on. Third, cover the essentials with the guaranteed pieces. Everything else is upside.

"Build your portfolio so that you have guaranteed income to cover your expenses and then some," he says. "And then everything else, you don't have to worry about."

That last line is the whole point. When your monthly bills are covered by income you cannot outlive, the rest of the portfolio stops feeling like a life-support system. It goes back to being what it is: money.

Peak 65 Is Here  

Paul flags a demographic moment that makes this conversation more urgent than it was 10 years ago. The Alliance for Lifetime Income has named 2024 through 2027 the "Peak 65 Zone," with more than 4.1 million Americans turning 65 every year, more than 11,200 per day, the largest surge in U.S. history. Most of them do not have a traditional pension behind them. In 1980, roughly 60% of private-sector workers relied on a pension as their only retirement account. By 2020, that number was 4%.

The job of turning a lump sum into a lifetime paycheck used to sit with an employer. Now it sits with the retiree. Which is exactly why the retirement-paycheck conversation Paul has spent 44 years having is worth having again.

FAQ  

What is an annuity, in one sentence? An annuity is a contract with an insurance company that lets you grow money on a tax-deferred basis and, when you choose, turn it into income for a set period or for the rest of your life.

Is an annuity the same as life insurance? They are cousins. Life insurance pays if you die sooner than expected. An annuity pays you if you live longer than expected. Both are risk-transfer contracts.

Are annuities FDIC insured? No. Annuities are backed by the claims-paying ability and financial strength of the issuing insurance carrier. Carrier ratings matter.

Is an annuity right for everyone? No. Products may or may not be suitable for a given person and are subject to state availability and individual suitability. A licensed insurance professional should run your specific numbers before you commit.

When should I start thinking about retirement income? Paul's answer: "There's no reason to delay. The earlier you start, the better off you will be." Most of the variables become predictable once you sit with them.

Where To Start  

Want to take the next step? Run your own numbers with the free WIYN calculator at brettblake.annuity.com, which takes about three minutes. Ready to talk it through? Book a Retirement Clarity Session with Brett. Not a sales call. Not a slide deck. Your numbers, not ours.

You spent 40 years learning how to fill the bucket. It is worth an afternoon learning how to turn on the tap without running it dry.

Worry Less. Live Longer.

About the host  

Brett A. Blake hosts Safe Money Radio and is the CEO of Annuity.com. He is 58, a Harvard MBA who will tell you the degree taught him almost nothing about retirement income. Before Annuity.com, he helped scale a business to nearly $1 billion in annual sales. He lives in Gilbert, Arizona with his wife Erin, and asks the questions every retiree would ask if they had access to the right rooms.

About the guest  

Paul Garofoli is Regional Vice President of Individual Annuities at The Standard and a 44-year veteran of the insurance business. He sits on the board of the National Association for Fixed Annuities (NAFA) and earned his RICP® from The American College in 2023. A summa cum laude, Phi Beta Kappa graduate of the University of Massachusetts in political science and economics, Paul is a nationally recognized speaker known for turning complicated retirement-income concepts into plain English.

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Safe Money Radio is for educational purposes only and does not constitute investment, tax, or legal advice. Products discussed may not be appropriate for everyone. Always consult a licensed professional before making financial decisions. Product availability varies by state. Guest opinions are their own and past performance does not guarantee future results. The Standard is not an affiliate of Annuity.com, Inc., and the appearance of a guest does not constitute endorsement of any carrier or product. Our Agents are licensed to sell insurance products, including annuity products that guarantee retirement income based on the financial strength of the insurance company providing the product. Annuities may not be suitable for everyone. Guarantees are not government-backed or provided by Annuity.com, Inc. Annuity.com, Inc. is a licensed insurance agency. National Producer Number (NPN): 21086345. Licensed in all states where required by law. Doing business in Florida and California as "Annuity.com Insurance Marketing," CA License No. 6013124. In New York, licensed as Annuity.com Insurance Solutions, License No. LA-1860109.