Longevity Insurance
I heard Prof. Zvi Bodie recommend looking into longevity insurance.
It's a different sort of life policy that starts paying annual benefits if you live to a specified age. For example, I have a May 09 article stating that MetLife offers a policy with annual benefits of $56,106 (today's dollars) beginning at age 85 for a 60-year-old male who pays a one-time up-front premium of $50k.
I entered this stream of payments into ESPlanner as a non-guaranteed annuity beginning in the 85th year (separate policies for me and my wife).
Standard of living shot up by 76% in that year, and consequently the program also recommended considerable life insurance for me.
Then I cut the assumed premium and benefits in half. Got a much smoother consumption path and lower recommendations for life insurance.
Overall, adding longevity insurance to our profile raises living standard by about 8%.
With the regular annuity market being unfavorable due to low interest rates, this product seems to offer an alternative.
Anyone else have experience with this?
Richard
RSS
Delaying SS benefits until age 70 is a better way to purchase more life annuity, because it's cheaper, includes an inflation adjustment, and has survivorship benefits.
Singe Payment Deferred Annuities look attractive to me too, as an addition to SS. However, inflation risk is significant over such a long period even though inflation is low or non-existent now. I would evaluate SPDAs with inflation protection.
Agree, and I've been assuming age 70 for starting Soc Sec too.
I've got inflation set for an average of 3% in the software. So ESPlanner is discounting the current-dollar amount for modest average inflation levels over the long 25 year period.
Will call MetLife to get details on inflation protection.
Another concern is company risk--need to explore what protections my state (NC) offers re: insolvency of annuity provider.
(then there's concern about my state but...I'm afraid yours is probably worse)
I agree with what's been said re waiting to 70, if at all possible and if one is not sure one will die young, to collect Social Security. I also agree that one needs to weigh the risk that you will outlive the insurance company and not get paid. Insurance companies can go broke and have no real backup. The state insurance reserves are a joke. And there are limits on what they pay in any case. Also, I'd stay miles away from anything that was not fully inflation protected. Inflation is going to come and big time given the amount of money Uncle Sam will need to print over time to "pay" his bills.