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Retirement IncomeRisks and Strategies$
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Mark J. Warshawsky

Print publication date: 2011

Print ISBN-13: 9780262016933

Published to MIT Press Scholarship Online: August 2013

DOI: 10.7551/mitpress/9780262016933.001.0001

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Tax Issues and Life Care Annuities

Tax Issues and Life Care Annuities

Chapter:
(p.215) 9 Tax Issues and Life Care Annuities
Source:
Retirement Income
Author(s):

David Brazell

Jason Brown

Publisher:
The MIT Press
DOI:10.7551/mitpress/9780262016933.003.0009

This chapter discusses life care annuity (LCA), which is defined as an integrated insurance product consisting of life annuity and long-term care insurance (LTCI) segments. In return for the payment of one or more premium charges, an LCA product will pay a stream of fixed periodic income payments for the lifetime of the named annuitant and, for a higher premium charge, any named co-annuitant survivor. The chapter addresses inefficiencies in the separate private markets for its component parts: Adverse selection, which increases the price of life annuities; and strict underwriting, which restricts the availability of LTCI. It argues that an LCA may be more attractive to retirees making critical choices in financing their lifetime retirement spending and insuring against the bankrupting contingency of severe disability if prices are lowered and availability is increased.

Keywords:   life care annuity, LCA, life annuity, LTCI, annuitant, co-annuitant survivor, adverse selection, strict underwriting

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