Lifetime annuities, a kind of do-it-yourself pension that can provide you a guaranteed income until the day you die, are now paying out monthly income as much as a third higher than similar annuities bought just a year ago.
I come bearing good news for those who are recently retired, who are about to retire soon, and for anyone else who wants a secure income for the rest of their life.
As you can see from our table, someone planning to retire early, in their mid-50s, and willing to pay a one-off premium of $100,000, can lock in a lifetime income of more than $6,000 a year, whereas a year ago they would have got significantly less than $5,000. The percentage rises are less, though still substantial, even at older ages.
Those who die soon get a poor deal. The surplus money helps pay for those who live much longer than expected. Naturally, this good news comes with the downside that anyone who bought an annuity last year is kicking themselves for missing out, and is furthermore watching their payouts get devalued by persistent inflation. But as we cannot change the past let’s at least focus on the present .
One of the key problems since the global financial crisis has been their desperately low payout rates. Retirees can thank the Federal Reserve, which has pursued a policy of financial manipulation to keep short, intermediate and long-term interest rates low in the hope of stimulating the economy.
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