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Fixed Annuities Beat Longevity Risk

In the The New York Times, Mark Hulbert’s “Beyond the Longevity Tables” speaks about academic researchers recommendation of fixed annuities.  These researchers have long been fans of fixed life annuities which guarantee a specific yearly payout until the investor, or their spouse, passes away.  The article compares a 65-year old woman investing $100,000 in treasury securities for her life expectancy of 20 years.  If she lives longer than that life expectancy, which one in three women do, she will outlive her money.  But the same woman investing the same amount in a fixed life annuity would have a higher monthly return and would receive her payments for as long as she lives.

Investing in riskier assets has the potential for yielding higher returns but can, unfortunately, lead to significant losses as has been shown in the past year or two.  That is why the academic researchers and other experts have noted the benefits of fixed annuities for years.  The president of a financial planning firm in Florida believes that “there is no other real alternative to dealing with longevity risk.”  It is always important to shop around for the best fixed annuity rates and to use a reputable financial planner.

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