Originally Posted by FUEGO
I was referring to a regular annuity that could be annuitized in the future at a given age (say, 80) that would pay equal payments or inflation adjusted payments from the age of annuitization until death. Definitely not a variable annuity.
My point is that annuitizing at age 65 doesn't give you a much higher cash flow due to mortality of others' in the insurance pool dying. Whereas, by age 80, the mortality rate of individuals in the risk pool is sufficiently large that you add a few percentage points (or 10% or more depending on age) to the return you get from an annuity.
What are the specific features of the "longevity insurance" you are describing? I'm quite the opposite of an expert on this, so I may be confusing things (but I'm interested in learning more about the mechanics of these products).
To me, the key difference between a "regular SPDA" and these newer products is surrender values before the monthly income begins.
If you buy at 65 intending to take a monthly income at 85, but have the right to surrender for most of your premium before then, you have a regular SPDA. If you can't get any money out without living to 85, and then the only payout is a monthly income, that's an unusual product that some people call "longevity insurance".
There are features that can blur the difference. It sounds like Kronk's could be purchased with a death benefit if you die before the monthly income begins, but no payout for a voluntary surrender.
I agree with the article that the logical use of the no-surrender-value version is to use a small percent of your assets to guarantee a monthly income if you happen to live a long time, but then maintain control over the bulk of your assets, knowing that you can spend principal from them because you've got the back end covered. If I were buying something like this, I wouldn't want the death benefit rider.