With a participating annuity, premiums paid by those who die earlier than expected contribute to gains of the overall pool and provide a higher yield to survivors than could be achieved through individual investments outside of the pool. The mortality yield increases significantly with age, often creating a return that would be impossible to match in the broader financial markets.
Duration is a measure of the time associated with cash flows or payments from a bond. Duration measures the amount of time (in years from the purchase date) required for a bond owner to receive interest and principal payments that are equal to the cost of the bond.
Long duration bonds have payments that are spread-out over a relatively long period of time (e.g...
A common question is how annuities compare to other financial products that seem similar such as bonds, certificates of deposit (CD) and money market funds. After all, each of these products promises to provide some type of fixed return in exchange for your investment.
Looking at a simple life annuity can help answer this...
As discussed in a recent post, ultra low interest rates are an...
