Fight Aging!

Conservative models for the next few decades of human life spans in the wealthier regions of the world, those used by insurance industry giants to create their products, predict only a gentle continuation of present trends towards greater life expectancy. These gains clock in at the moment at 2.5 years every decade for life expectancy at birth and one year every decade for adult life expectancy. The actuarial community has for the past decade increasingly hedged its models with pronouncements of uncertainty, which is eminently sensible in an age of accelerating progress in biotechnology. Still, despite this, the financial industry is comfortable offering a class of products varying called longevity insurance, longevity annuities, deferred income annuities, life annuities, or a variety of other terms: pay the company a lump sum now, and starting at some point in the future you are paid a regular income until you die. As for any such transactions, the company makes money on this proposition by correctly predicting demographics such that, on average, it pays out less than it can make with the lump sum.

A secure retirement, no matter how long you live

Longevity annuities have actually been around in various forms for a decade or more. They've been getting a lot more attention lately, however, because the U.S. Treasury Department issued rules last year that make it easier and more attractive to buy a certain type of longevity annuity within retirement accounts such as 401(k)s and IRAs.

Essentially, a longevity annuity is a twist on a somewhat more familiar type of annuity, the immediate annuity. With an immediate annuity, you hand over a sum of money to an insurer in return for guaranteed monthly payments that start at once and continue for the rest of your life. (You can also opt for payments to continue as long as either you or your spouse or partner is alive.)

Like an immediate annuity, a longevity annuity provides guaranteed income for life, except that while you invest your money now, the payments don't begin until later, typically much later, say, 10 to 20 years in the future. In effect, buying a longevity annuity is a bit like buying a life insurance policy, but instead of making a payment to your heirs when you die, a longevity annuity makes monthly payouts to you for the rest of your life, assuming you're still alive when those payments are scheduled to begin.

Now in the world of yesterday, in which there was only a little uncertainty in the possibly unexpected upside of life expectancy, this is all fine and well. Some people want the assurance that they will not run out of money in later retirement, and judge the direct and opportunity costs of setting up a longevity insurance policy to be worth it for the end result of peace of mind. Fortunately we no longer live in that world. We live in a world in which there is a good chance that a range of rejuvenation therapies after the SENS model will start arriving for early adopters - people willing to dive into medical tourism - from five to twenty years from now, depending on circumstances. Interestingly, however, those of us reading this now are in a small minority in buying into this vision of the future. Very few people follow medical research closely, and comparatively few people think that the future of aging will be radically different from aging today.

This arguably presents an opportunity to profit from being in the know. As I put it some years ago, take the money and run: sign a longevity insurance policy with a large company, making sure that the fine print doesn't sabotage the plan, and then strive not to die from any accidental cause as we enter the age in which medical control over the causes of aging becomes possible. In making use of future rejuvenation therapies, your healthy longevity will likely prove to be significantly greater than that predicted by the current actuarial consensus. However, it is worth remembering that adherence to contracts over the long term is for people who can't afford to buy the political process:

It would seem to be the case that either:

a) enough people die at younger ages than you that the offering company makes money and stays in business. In other words, healthy life extension research did not succeed rapidly enough to help you either - you will age, suffer and die.

b) healthy life extension takes off and the insurer is left with a huge liability, which may or may not actually be paid. That depends on how well the insurer handled the funds, the level of economic growth across the years, and the level of interest in the original product, amongst other items. Bribing politicians to write new law to remove obligations is a very predictable out, however.

c) the product is of poor enough value that the company can offer it even though healthy life extension research succeeds - in which case you would likely have been better off placing your funds elsewhere.

So in addition to betting that the company you sign with remains solvent for long enough to make it worthwhile, you are also betting that the losses from longevity insurance caused by large gains in life expectancy across most of the population will not otherwise sink the industry. There is no free lunch, and it seems likely that creating an exceptionally good deal for yourself that lasts decades or longer is only possible when few other people also think they can get a free lunch from longevity insurance and act accordingly.