"I have an annuity but I need cash now."

[EdS2]

(05-10-2024 02:57 PM)KeithB Wrote:  This might be in the presentation, but the problem with figuring out an annuity for yourself - with actuarial tables - is that you have no idea how long you are going to need the annuity.

The problem of not buying an annuity is the risk of outliving your money.

The way I see it, whereas life assurance is a bet you place with the meaning "I bet I'll die early", an annuity is a bet you place with the meaning "I bet I'll live for ages" - the institution taking the other side of that bet, having the advantage of averaging out the outcomes.

In my circumstances, I'm happy with the idea of buying a large enough annuity to cover my expenses - if I can afford to. I don't need to know my life expectancy or the 95% confidence interval. Or should that be 99%?

But having said that, in the UK (or, perhaps, England and Wales) at least one can get something like the confidence interval as well as the life expectancy, in an official calculator. (I'm not 75, but I looked this up: "75 year old male, average life expectancy 86 years, 1 in 4 chance of 92 years, 1 in 10 chance of 96 years, 2.8% chance of 100 years".) More here and much more here.

BTW I'd be wary of taking any simple averages in this arena - the few people who live much longer might be much more expensive, from the point of view of the institution, so the average might well be some kind of non-linear weighted average. Perhaps a Monte Carlo simulation would be best.