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The Economic Perspective: “Never Outliving Your Investments”

Mary: I’m Mary Walden with economist MW, welcoming you to the economic
perspective. Today’s program looks at, never outliving your investments. Mike, it used
to be that many workers, including so-called blue-collar workers, had pensions from their
companies. These pensions would be paid as long as the person lived, so there was never
a worry about living so long that you’d have no income. Today, those kinds of pensions
are rarer. However, I’ve heard investment advisers say they have plans to make sure you
never outlive your money. Are these plans believable?
Mike: Summary Answer
a. Yes they are
b. Based on a concept called an annuity
c. Deposit money, then based on an interest rate, receive regular payments as
long as live
d. How can this be done – it’s the opposite of life insurance
e. With life insurance, beneficiaries of people who die early are effectively
subsidized by people who live long
f. With annuity, people who die early effectively subsidize people who live
long
g. Some don’t like this – but if don’t know how long you’ll live, is an option
h. I’m MW
Mary: And I’m Mary Walden for the Economic Perspective, an NC State Extension
program from the Department of Agricultural and Resource Economics.