Sentences with phrase «mortality credits»

So in practical terms how do mortality credits as well as an annuity's guarantee of a steady lifetime payment translate into an edge over simply investing your money and carefully drawing it down?

The older you are the more mortality credits you have (less years left to live) so the insurance company will offer a higher monthly annuity income.

The pricing of products available to younger people reflects little benefit from mortality credits because few people that age die.

If fixed annuities interest you, the sweet spot for purchasing them is around age 70 to 72, when mortality credits are higher, making the payouts larger.

Which means that the annuity payment you receive includes not just investment gains and the return of your original investment, but mortality credits as well.

If you have good reason to believe you'll die before you reach life expectancy, an annuity isn't a good choice as you'll be the one providing mortality credits to those annuity owners who go own to live long lives.

As ColoradoCFA mentioned, a discussion of mortality credits and how they work would be good — these are basically the reason that these products become better deals the older you get.

Because of something called mortality credits.

It's true that mortality credits get better the later you wait, Vettese explained in an interview with me, but those worried about overvalued stock markets and a harsh correction in the next few years may not be able to afford to wait.

At first glance it's a morbid concept that involves the pooling of investments such that those who die end up subsidizing those who keep living (hence the term mortality credits).

Last August Milevsky's article Tontine Thinking was published in The Actuary, arguing mortality credits should be re-introduced explicitly in the design of future Retirement Income products.

Depending on the age of the investor during the deferral period, additional mortality credits may improve the expected return on fixed income investments prior to the initiation of annuity payments.

Since insurance companies typically invest in relatively safe fixed - income securities, e.g., bonds, the added mortality credits in a longevity annuity can make it more efficient (higher return) over the long run that a bond portfolio.

Conservatively, a QLAC can be a diversifier, introducing mortality credits, to a bond portfolio.

Longevity annuities use mortality credits to pool money and pay out the remaining policy holders» claims, this being living a long life.

Future changes in the environment can easily rearrange the efficiencies of these various elements; efficiencies based on mortality credits are most robust.

Despite the fact that one research paper recently found Americans are more afraid of outliving their money during retirement than death itself, and economics research has long since shown that leveraging mortality credits through annuitization is an «efficient» way to buy retirement income that can't be outlived, the adoption of guaranteed lifetime income vehicles like a single premium immediate annuity purchased at retirement remains extremely low.

A longer deferral period will allow a client to buy a larger annuity payment because (1) assets have more time to grow; (2) there will be fewer years of distribution; and (3) more mortality credits are available.

«I don't think paying 100 basis points per year for an investment portfolio that provides no mortality credits and exposes retirees to longevity risk is better than a competitively priced variable annuity.»

Because in addition to interest and return of a portion of your principal, each annuity payment effectively contains an extra little amount known as a «mortality credit» — essentially, money transferred from annuity owners who die early to those who live long lives.

So in calculating the payments annuity owners will get, insurers can factor in «mortality credits,» which is insurance - speak for the money that's effectively transferred from those annuity owners who die early to those who live a long life.

So an annuity payment includes not just investment gains and the return of your original investment, but this additional «mortality credit» income as well.

Of course, if you die early, you're the one providing the mortality credit to others.

Mortality credits aren't available to you when you invest as an individual, which means the only way for you to get the same level of income an annuity offers is to invest more aggressively.

Thus, each annuity payment effectively includes three elements: investment gains; the return of a portion of your original investment; and, «mortality credits,» which you can think of as an extra piece of income or return.

So when setting annuity payments, insurance company actuaries are able to include what are know in insurance circles as «mortality credits,» essentially money that would have gone to annuity owners who die early but that's instead transferred to those who live longer.

The upshot, though, is that unless you're willing to take on more investing risk — which also means accepting the possibility of running through your money while you're still alive — it's very unlikely that you can match an immediate annuity's guarantee of lifetime payments, which includes that extra bit of income that mortality credits provide.

What in the world, you may ask, are mortality credits?

But if you've rejected an immediate annuity because you think you can generate the same level of guaranteed lifetime income investing on your own, I have two little words for you: mortality credits.

I can't tell you the number of times after doing an annuity story that I've gotten feedback from people who essentially say they would never buy annuity because they think can do better investing on their own (never mind that's difficult to impossible to do without taking on greater risk because annuities have what amounts to an extra return called a «mortality credit» that individuals can't duplicate on their own).

This means that both the actual income earned AND the mortality credits are eventually taxed.

(and, regarding «mortality credits», you assume I know more than I actually do....

Nice compendium, though some discussion of the concept of «mortality credits» would be useful.

I'll be the first to admit that «mortality credits» and the cost / benefit analysis of them is well beyond my scope of expertise on this topic!

For most people, at some age (generally > 50), the expected insurance value of the mortality credits (your longevity insurance) becomes greater than the cost for some piece of their portfolio.

These payment enhancements are known as «mortality credits.»

As Birenbaum explains in a YouTube video, how much you receive from an annuity is very much age - related and the later you start, the higher the mortality credits (which you get from pooling longevity risk with others).

Most prospective buyers of annuities tend to live longer than average, but some fear dying early and leaving money for strangers to enjoy what's called a mortality credit.

Unfortunately the Defined Contribution (DC) plans that are displacing DB plans «rob» retirees of both mortality credits and the benefits of risk pooling, Milevsky wrote.

One of the problems of the decline of Defined Benefit pension plans in the private sector is that the alternatives do not provide the same sort of «mortality credits» that DB plans provide: in effect, those who die early subsidize those with longer lifetimes.

Since these products do not offer any retirement alpha (i.e. longevity credits, otherwise known as mortality credits) a topic that I highlighted via this blog a few months ago: Increased Life Expectancy Leads to a Decrease in Payout Rates, it will take a much larger portion of your funds to generate the same amount of income.

Milevsky argues that even at today's rock - bottom interest rates, annuities should pay more than comparable fixed - income investments because of the built - in mortality credits.

Milevsky favours plain - vanilla annuities and cautions against buying too many bells and whistles: every time you add guarantees, minimums, and survivorship benefits, you water down the mortality credits.

Moreover, the inflation - adjusted income flows, at least initially and for several years thereafter, will likely be lower than those of a life annuity because of the latter's «mortality credit,» the sharing of mortality gains among survivors in the annuity purchase pool.

Payout rates include interest, return of premium, and mortality credits.

If you buy your income annuity at age 70 or older, the annuity companies can provide a higher payout to you; something akin to a higher rate of return because of the way these mortality credits work.

Deferral of Social Security income, say from age 62 to age 70, has a similar effect on payouts as in a deferred income annuity (another name for longevity insurance); mortality credits can accrue during this deferral period, say from 62 to 70.