Re:Ask HN: Why not have reverse life insurance that rewards ...
by blairanderson on Friday July 01, 2022 @03:57PM
(#31951944)
yes and simple calculators are everywhere: https://www.schwab.com/annuities/fixed-income-annuity-calcul...
Its basically 5% Annually... to which stock-people say "why not put into a dividend earning fund" and analysis paralysis kicks in...
Re:Ask HN: Why not have reverse life insurance that rewards ...
by burntoutfire on Friday July 01, 2022 @04:10PM
(#31952116)
I went into that calculator and it does not say anything about inflation... Do annuities get wiped out by inflation (i.e. they'll keep paying me the agreed monthly amount, but unfortunately it's not going to be worth much)? If, then they're pretty crappy.
Re:Ask HN: Why not have reverse life insurance that rewards ...
by tfehring on Friday July 01, 2022 @07:11PM
(#31954239)
Yes, they generally get wiped out by inflation. You can get annuities whose payments increase by a fixed amount every year, or that increase based on the performance of the S&P 500 or whatever, but AFAIK you can't get an annuity with inflation-indexed payments today. I agree that that limitation makes them pretty crappy. Inflation-indexed annuities used to be available (I think until 2010 or so), but companies broadly stopped selling them because hedging long-term inflation is expensive.
Re:Ask HN: Why not have reverse life insurance that rewards ...
by BayesianDice on Saturday July 02, 2022 @03:08PM
(#31961473)
In the UK at least it looks like you can still get inflation index-linked annuities - for example, there are entries in the Hargreaves Lansdown "best buy" tables for for RPI-linked annuities: https://www.hl.co.uk/retirement/annuities/best-buy-rates
But their starting income is less than half the income from the non-increasing annuity, presumably because of difficulty/expense in hedging inflation risk.
Re:Ask HN: Why not have reverse life insurance that rewards ...
by rundmc on Friday July 01, 2022 @05:11PM
(#31952998)
Fully agree. That's why tontine are so attractive, the income is expected to rise which may keep up and possibly surpass inflation.
Re:Ask HN: Why not have reverse life insurance that rewards ...
by noodlesUK on Friday July 01, 2022 @05:09PM
(#31952972)
There are instruments at least that used to exist (in the UK) called defined benefit pensions that effectively work as you describe. They have some level of inflation cap (typically between 3 and 9%) beyond which they are not inflation protected. I don’t know if people can still get them, but many pensioners in the UK on private pensions have them.
Re:Ask HN: Why not have reverse life insurance that rewards ...
by sp527 on Friday July 01, 2022 @05:15PM
(#31953044)
That strategy is even better when you factor in stepped up cost bases on inherited property.
Re:Ask HN: Why not have reverse life insurance that rewards ...
by rundmc on Friday July 01, 2022 @05:15PM
(#31953043)
But the annuity only 'rewards' your longevity if you live 15-20 years or more because that is the bare minimum it takes to get back your capital.
Re:Ask HN: Why not have reverse life insurance that rewards ...
by imachine1980_ on Friday July 01, 2022 @05:44PM
(#31953408)
Yes, that's the point.
if not is a ponsi scheme, or simple investment in bonds, the point is you make sure than you don't get whiout buck if you live till 100, not make maximun money, this service use actuarial probability to assurethat.
Re:Ask HN: Why not have reverse life insurance that rewards ...
by muzani on Friday July 01, 2022 @07:37PM
(#31954439)
I used to say insurance was a form of gambling, but it's really just planning around worst case scenarios (dying before I can save for kids' education).
Annuities sound like the actual gambling, lol.
In life insurance, you pay the company a small periodic payment in exchange for a large lump sum payment if you die while the coverage is in force. If you die after paying just one premium, you win! If you live so long that you paid more in premium than the lump sum, you lose!
With an annuity, you pay the company a large lump sum in exchange for a small periodic payment for the rest of your life. If you die after receiving just one payment, you lose! If you live so long that the company pays you more than your initial lump sum payment, you win!