Live Long And Prosper But Not Too Long
Live long, prosper and enjoy lifetime income regardless how long you live
Who doesn’t want to live a long time? As long as a person if healthy, living a long time can be an enjoyable event. The government Office on Aging recently released new research on how long we can expect to live (Mortality Table: http://www.ssa.gov/oact/STATS/table4c6.html ) much longer than was estimated as short as the year 2000.
In 2009 it was estimated that a male currently age 65 would live until age 84.6, a female 86.4. But because of better nutrition, better health practices, and better medicine, that has changed. As of 2014, a male currently age 65 is now estimated to live 86.6 years, an increase of over 2 years. A 65 year old female as of 2014 would expect to live 88.8 years.
That should be good news for everyone right? It is except for those whose business model is based on calculating a known life expectancy, insurance companies.
An insurance company using the 2000 mortality table when calculating an annuity pension would now be subject to additional liability in payments simply because we are living longer.
You can bet that actuaries all over the country are running spreadsheets trying to get a handle on the new liability caused by more longevity. Remember, an insurance company will accept the responsibility of making sure your monthly check is in your account regardless of how long you may live. Now that simple promise is going to have a severe effect on the performance of the insurance company.
Does that mean that insurance companies will stop offering lifetime guarantees? My guess is no simply because it is the absolute best feature provided in an annuity.
Folks buy the guarantee because it allows them worry-free income, income for life, guaranteed.