> There's a 1/3 chance of not making it to 81. But then there's also a 20% chance of making it past 91. What do you do about that? You can't spend all your money now. But you can't not spend it, either.
Pensions and annuities, unlike private retirement savings in stocks and bonds, spread this risk out among many people. Your father could get about $650 per month guaranteed for life for every $100,000 he puts in an annuity today.
That insures you against the long tail of living too long, yes. But if you knew you had exactly 5 years with 99% probability, you wouldn't do that, right?
Also plenty of things are not purely financial. How will you know if this is the last opportunity to see an old friend? As a 34 year old there are plenty of friends I put off catching up with because it will happen someday. As a 71 year old?
Pensions and annuities, unlike private retirement savings in stocks and bonds, spread this risk out among many people. Your father could get about $650 per month guaranteed for life for every $100,000 he puts in an annuity today.