Some time ago, there was a thread here about longevity annuities -- annuities that only start to pay out if and when you reach an old age, such as 85.
Does anyone offer an inflation-adjusted longevity annuity?
I contacted MetLife to inquire about their longevity annuities, but I was not impressed. They gave me the following quote for my 61-year old mother:
Initial Purchase Payment: $30K
Commencement Date: 85 years old (24 years from now)
Income payment amount: $1571.04/month (non-inflation-adjusted)
I calculated the PV of this potential income stream using a 3% real interest rate (i.e., TIPS) as the discount rate and using the mortality statistics in the 2004 Period Life Table on the ssa.gov website.
The only way it would make sense is if there was no inflation.
With no inflation, the PV = $28,500
But with 3% inflation, the PV = $12,500
And with 4% inflation, the PV = $9,600
A horrible deal, IMO. (The PV calculations take into account the likelihood of one dying and getting nothing or little).
Has anyone else looked into longevity annuities and tried to estimate their value?
Does anyone offer an inflation-adjusted longevity annuity?
I contacted MetLife to inquire about their longevity annuities, but I was not impressed. They gave me the following quote for my 61-year old mother:
Initial Purchase Payment: $30K
Commencement Date: 85 years old (24 years from now)
Income payment amount: $1571.04/month (non-inflation-adjusted)
I calculated the PV of this potential income stream using a 3% real interest rate (i.e., TIPS) as the discount rate and using the mortality statistics in the 2004 Period Life Table on the ssa.gov website.
The only way it would make sense is if there was no inflation.
With no inflation, the PV = $28,500
But with 3% inflation, the PV = $12,500
And with 4% inflation, the PV = $9,600
A horrible deal, IMO. (The PV calculations take into account the likelihood of one dying and getting nothing or little).
Has anyone else looked into longevity annuities and tried to estimate their value?