A new way make sure your parents don't outlive their money

[RonBoyd]

Really?

https://moneywise.com/a/a-new-way-to-help-your-parents-live-a-long-prosperous-life?

AgeUp is a new annuity that guarantees monthly income when people reach their 90s. It costs as little as $25 a month and is available to anyone whose parent, grandparent, aunt, uncle, mother-in-law or father-in-law is between ages 50 and 75.

“We set out to create a solution to help everyday Americans address this growing need,” explains Blair Baldwin, general manager of the project, “and found we could achieve this goal by creating a new kind of deferred income annuity we call AgeUp.”

Annuities are typically sold by insurance agents, brokers or financial planners, and they involve reams of paper. AgeUp, which is targeted to millennials and Gen Xers, is conveniently sold only online.

 

[ERD50]

I just skimmed, but it's the younger person paying the premium - I guess the thought is that they won't be in a position of supporting their parents if their parents run out of money at age 90?

I'd bet the "as little as" $25/month is for for insurance for a 50 YO. So that $25/month will be paid for a long time (40 years!), and on average not paid out for long.

Though annuities do make some sense in terms of risk pooling, but it's always hard to figure out if the costs are so high it might make better sense to self-insure.

-ERD50

 

[MarieIG]

It looks like an annuity where the payments don't start until age 91. A lot of seniors need money for their care way before that.

 

[Free To Canoe]

between ages 50 and 75.....

That's 15 years before they have to pay anything. Maybe they will take the money and run by then.

 

[pb4uski]

I just skimmed, but it's the younger person paying the premium - I guess the thought is that they won't be in a position of supporting their parents if their parents run out of money at age 90?

I'd bet the "as little as" $25/month is for for insurance for a 50 YO. So that $25/month will be paid for a long time (40 years!), and on average not paid out for long.

Though annuities do make some sense in terms of risk pooling, but it's always hard to figure out if the costs are so high it might make better sense to self-insure.

-ERD50

And that $x per month benefit at age 50 when the annuity is bought has a fraction of the purchasing power 40 years later when benefits start..

The younger person would be better off investing that $25/more for 40 years and then after 40 years either start automatic monthly redemptions to replicate the benefit. That way, if the beneficiary dies earlier than benefits start, which is more likely than not, it isn't wasted money.

Gotta love those annuity salespushers though... when all you have in your toolbox is a hammer, every problem looks like a nail.

ETA: From immediateannuities.com

Longest deferral period for an annuity on that site is 25 years. It would cost $50,463 today to buy a deferred annuity for a 65 yo male in FL that would provide a benefit of $3,000/mo beginning at age 90. It would cost $174,622 to buy an immediate annuity for a 90 yo male in FL. So during the deferral period, the annuity is effectively earning 5.09% (the fv of $50,463 at 5.09% for 25 years is $174,622).

I guess that I would take my chances that over a 25 year period that I could average 5.09% with a conservative balanced portfolio.

 

[KenZ71]

Ponzi scheme?

 

[Which Roger]

Sounds like yet another case where the concept (longevity insurance) is good, but the implementation is bad for the consumer and good for the seller.

 

[JoeWras]

The marketing for this is cashing in on the generation war. "OK, Boomer, you are screwing us over and you won't even take care of yourself. That's OK, we got you covered."

 

[Independent]

Ponzi scheme?

I doubt it. The company behind this is MassMutual. They have mandatory statutory reserves.