I share your concerns, although my concerns are perhaps not so much for the general population as for myself as an individual. If I live to age 85, I am planning to re-do my retirement planning at that time with 100 or even 105 as the projected age of death instead of 95. To do this I might have to buy an immediate lifetime annuity (which I suppose should be fairly cheap at age 85), or cut back on my expenses.
Made me look!
I had thought that the insurance companies didn't offer annuities at that age, as there would be too few willing to purchase them, so too few to average into a pool.
But, looking at:
https://www.immediateannuities.com
A male at 85 (they go to 90!), would get Life & 5 Years Certain
$11,370/month on a $1M. So that's 13.6% (non inflation adjusted after 85, but still...). Hmmmm....
So considering an even not-so-conservative retiree drawing 4%, it would just take 1/3 of their portfolio (assuming it was still providing a current withdraw amount at 4%) invested in the annuity to provide that +4%, and the remaining 2/3rd could be funny money, or reserved for heirs/charity. That sounds pretty attractive.
And annuities are apparently at a low payout point, due to low interest rates. So future payouts could be even better.
I know there is a lot of anti-annuity feeling here, and there are some good reasons for that. I have always been in the camp that feels an annuity could be right under the right circumstances, and it would make more sense as I aged. But these numbers look very promising. Part of that is, with fewer years to our ultimate demise, the odds of the annuity company going broke, and not being covered by other means, are greatly reduced. A 15 year future is way different from a 40 year future.
Another reference point: If you accounted for reaching 105 when you are 85, that's 20 years, and a portfolio that just kept up with inflation would provide 1/20, or a 5% WR. That's not quite apples-apples, as the annuity would have no inflation adjustment, but that's still a large gap to backfill.
-ERD50