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My Personal Finance Journey

Personal finance observation, musing and decisions in a journey toward financial independence by 36 with at least $1 million.

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Longevity Insurance: New Products Attempt To Solve an Age-Old Problem





Interesting innovation!

From Wall Street Journal:

How does the product work? Suppose you are worried about outliving your savings and want to guarantee yourself $1,000 a month for life starting at age 85. With the MetLife product, you could lock in that income by investing $33,800 at age 65.

In theory, this is a great idea. In practice, I think MetLife's product has too many bells and whistles. For instance, it is possible to make a full or partial withdrawal of the annuity's value. In addition, if you die before income begins, your heirs receive your investment plus 3% annual interest.

Sound appealing? There is a downside: As with a conventional immediate annuity, all these features come at a price, in the form of lower monthly income.

In fact, you probably could generate fairly similar results by investing the $33,800 in a tax-deferred fixed annuity, letting it grow for 20 years and then converting it into an immediate annuity. Instead, I think the really exciting product will be MetLife's next iteration, which should be launched within the next six months.

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