annuity
TRANSCRIPT
Impact of artificially low government interest rates
With very low Government interest rates
- mortgage payments are reduced a lot
- but annuity payments to the elderly, too
- helping bad people- punishing good people
US Annuity payout for a single male at age 55, (inflation protected)
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%12
/31/
08
12/3
1/09
12/3
1/10
12/3
1/11
life
insu
ranc
e pa
yout
55
sing
le,
with
infla
tion
ridde
r
55ridder
model
insurance payout = ( 1 / life expectancy (LE) + tip10 ) / ( 1 + 15% profit )
rates ( % )
0
1
2
3
4
5
6
70
9/3
0/0
51
2/3
0/0
50
3/3
1/0
60
6/3
0/0
60
9/3
0/0
61
2/3
0/0
60
3/3
1/0
70
7/0
1/0
70
9/3
0/0
71
2/3
0/0
70
3/3
1/0
80
6/3
0/0
80
9/2
9/0
81
2/3
0/0
80
3/3
1/0
90
6/3
0/0
90
9/2
9/0
91
2/3
0/0
90
3/3
1/1
00
6/3
0/1
00
9/3
0/1
01
2/3
0/1
00
3/3
1/1
10
7/0
1/1
10
9/3
0/1
11
2/3
0/1
1
yea
rly
[ %
]
fed target
mort15
fed-10yr
mort30
US mortgage rates
Comments:
- first, understanding the respective business model- looking at from BOTH sides- in general, the formula is not that extremely precise, but gives you the fundamental relation
- in the US, the relation to gov bonds is close to 1:1
- in DE half the insurance corp holdings are to rental properties
DE annuity payouts vs age
3%
4%
5%
6%
7%
8%
50 55 60 65 70 75 80
age
Rate
of r
etur
n
public
garant
low
mid
high
Staat