Originally Posted by JohnEyles
Hmm, sounds like a SPIA to me. Except the SPIA goes away if you die, and
does better if you live more'n 30 years.
Can somebody explain the 30yr T-Bond ?
Yup, I agree with you that that is what it sounds like. Basically, I think Vanguard skims something off the top somehow, plays the averages (on average the life expectancy tables are correct), and then takes the longevity risk off your hands.
30 yr T-Bond I think is you lend the government money, they pay you interest every six months, and at the end you get your money back. I *believe* they are exempt from local and state taxes, but doublecheck for yourself. Certain bonds you can defer income taxes on the interest until maturity or when you sell, but I don't think the 30 year is like that. Certain bonds are sold at a discount to face value instead of paying interest.
You could lose on a 30-year bond if (a) you sell before maturity, (b) the government defaults (nobody thinks this will happen), or (c) rates go up and stay up after you buy -- the 30 year is at a fixed rate.