Money For the Rest of Us

Unlocking Hidden Returns: How Mortality Credits Boost Retirement Income

Feb 19, 2025
Discover how deferred income annuities can enhance retirement income more effectively than immediate annuities or bond ladders. Explore the fascinating concept of mortality credits and how they act as a powerful return booster. Learn how these credits can lead to an additional 1% to 1.5% in annualized returns over decades. Plus, find out the key factors to consider when deciding if an annuity fits into your retirement strategy.
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INSIGHT

Mortality Credits as Subsidies

  • Mortality credits are subsidies from those who die early to those who live longer in an annuity.
  • These credits increase the overall returns for the survivors.
INSIGHT

DIA vs. Immediate Annuity

  • Deferred income annuities (DIAs) offer greater mortality credits than immediate annuities.
  • This makes DIAs potentially more lucrative but riskier.
ANECDOTE

Hypothetical Annuity Scenarios

  • David Stein presented hypothetical scenarios comparing immediate and deferred annuities for a 65-year-old male.
  • The deferred annuity yielded a higher internal rate of return due to mortality credits.
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