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The pool of participants for SS contains both healthy people and not-so-healthy people. Anyone who meets the minimum contribution requirements will be eligible for a benefit.
On the other hand, the pool of participants for annuity buyers is self selecting to some degree. People who expect to have a shortened life for any reason are less likely to voluntarily buy an annuity than someone who is healthy.
Makes sense. And since insurance companies use their previous experience in creating life expectancy charts, the one for a private insurer may differ from that of a govt body
Makes sense. And since insurance companies use their previous experience in creating life expectancy charts, the one for a private insurer may differ from that of a govt body
I agree, the company I worked for 38 years offered a life insurance option which we paid for but was based upon the pool of employees which had life expectancy far beyond the avg pool. So they would suspend premiums every other year or so as experience justified it with our employee pool.
But if its true that the state must approve the table used for annuities sold in the state, one would think their would be one table that reflected this experience and bias of those buying annuities. Is it true states approve the life expectancy tables for annuities? If not regulated what is to prevent a company from using a table with longer than experience life expectancy as a way to reduce annuity payouts on policies that had been paid for in prior periods. Seems like it could be abused if not defined by some regulation and objective standards to produce and use such a table. I bought my policy in 2007 and started collecting payments after roughly 9 years from the market value of the investments not under the annuity conversion which is still available to me which is what I am now working options for consideration.
The pool of participants for SS contains both healthy people and not-so-healthy people. Anyone who meets the minimum contribution requirements will be eligible for a benefit.
On the other hand, the pool of participants for annuity buyers is self selecting to some degree. People who expect to have a shortened life for any reason are less likely to voluntarily buy an annuity than someone who is healthy.
My siblings were teachers. In that state they didn't care about the jobs in high school and college and part time that gave them enough credits. If you get a state retirement check you do not collect SS. If their spouse who collects SS would die they would not get any of that that either.
I spoke to Axa and got effective life expectancy with my policy. They are significantly longer than the tables I found online. For example I found at age 71 my life expectancy from an online non ssa source was 13.4 more years, but axa is using a life expectancy of 18 more years to calculate my annuity amount. Interesting.. not going to convert it any time soon, best to run down my fmv for a few more years before I annuitize. I might consider it in 2022 or 2023.
The nice thing is my contract keeps a death benefit until I annuitize which is attractive to my situation. I understand from a discussion with MathJack I believe it was that having this death benefit is not typical so I confirmed it again today with Axa and it matched my understanding a year or so back.
The insurance company could also give you a longer life expectancy to justify a lower rate of return and to make it more enticing to have an annuity. I don't know that they do this; it is pure conjecture. But it hangs together pretty well...
If not regulated what is to prevent a company from using a table with longer than experience life expectancy as a way to reduce annuity payouts on policies that had been paid for in prior periods.
Competition.
With that said, I'll confess I know very little about life insurance companies, and how they get regulated.
I spoke to Axa and got effective life expectancy with my policy. They are significantly longer than the tables I found online. For example I found at age 71 my life expectancy from an online non ssa source was 13.4 more years, but axa is using a life expectancy of 18 more years to calculate my annuity amount. Interesting.. not going to convert it any time soon, best to run down my fmv for a few more years before I annuitize. I might consider it in 2022 or 2023.
The nice thing is my contract keeps a death benefit until I annuitize which is attractive to my situation. I understand from a discussion with MathJack I believe it was that having this death benefit is not typical so I confirmed it again today with Axa and it matched my understanding a year or so back.
I've also got a death benefit on my annuity, but, in looking at the actuarial tables, decided to offset the possibility I might not live longer, by taking cash advances against the annuity (without annuitizing it and thus stopping the growth).
That's worked pretty well for 3-4 years, HOWEVER, I'm finding that the way in which the annuity company calculates income stream (overly complex), I'm reducing my annuitization amount more than I expected. The bottom line is, I think these insurance companies have annuities pretty much figured-out to their advantage.
I find these tables somewhat depressing as I really don't like thinking about my longevity as a short term program. I know that the healthy attitude is to be happy I have the opportunity to make what I want of my future, but I have seldom taken a hard look at this reality.
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