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After watching just the first couple of lectures of The Finance of Retirement & Pensions course on NovoEd, I've already learned something new! And apparently not discussed (much?) here: ALDA's. They seem like they might be a good idea for some people:
Addition:
Advanced Life Deferred Annuity http://www.dummies.com/how-to/conten...ies-aldas.html
Of course you need to trust that the insurance company will be around when it's time to payHere's a comparison of the two strategies:
Why is the ALDA cheaper than self-insuring? For the same reason that homeowner's insurance is cheaper than paying for damage to your home: because most homeowners never file a claim, and their premiums are used to reimburse the few who do. Similarly, the premiums of the ALDA owners who don't reach age 85 — and never file a "claim" — go to pay for the ones who do.
- With self-insuring, you might set aside your own personal old age fund at age 60. For instance, if you put $23,700 in reserve at age 60 and invested it in bonds paying 5 percent per year, you'd have about $80,000 by age 85. You could then buy an annuity that paid $1,000 a month for life. If you died before age 85, your heirs would get the entire reserve.
- With an ALDA, you'd pay only about $16,000 (according to one company's quote) at age 60 for a lifetime income of $1,000 starting at age 85. That's a savings of $7,700.
Addition:
Advanced Life Deferred Annuity http://www.dummies.com/how-to/conten...ies-aldas.html
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