Updated Implied Discount Rates for Single Premium Life Annuities as of July 25, 2022

In our post of April 2, 2022, we discussed possible assumptions used by life insurance company actuaries in pricing single premium immediate life annuities (SPIAs).  In that post, we provided implied discount rates consistent with quotes obtained from ImmediateAnnuities.com based on two different mortality assumptions (one based on life expectancy and the other based on a 25% probability of survival, which is the basis we recommend in our website for planning purposes).  In our post of May 18, 2022, we updated these implied interest rates consistent with SPIA quotes available on that date.   

In this post, we will examine the implied interest rate assumptions built into quotes from ImmediateAnnuities.com as of July 25, 2022 and compare the quotes and the implied interest rates with the results of the similar exercise we performed as of May 18.  You may wish to revisit our prior posts for more general discussion of annuity pricing assumptions.

Couples Planning in Retirement—How Much Will Household Expenses Decrease After the First Death?

We know that you probably don’t want to think about death or dying. But chances are fairly small that both you and your spouse will die at the same time. Therefore, if you are financial planning as a couple, your retirement plan should anticipate that one of you will predecease the other. And, while it is possible that some household expenses will remain about the same (or even increase), it is not unreasonable to assume that total household expenses will decrease after the first death within the couple. Of course, it is also possible that household sources of income will also decrease with the first death.

Financial Planning in (or Near) Retirement Made Super Easy

What if I told you that there is a simple, but very robust one-tab Excel workbook that you can download that will take you about 15 minutes to complete each year and will provide you with data points that will enable you to determine important planning information for your entire period of retirement, such as:

• How much you can afford to spend each year (spending budget)
• How much to invest in risky vs. non-risky assets (investment strategy)
• Whether you should consider going back to work on a full or part-time basis
• Whether you should consider deferring your (or your spouse’s) Social Security benefit, and
• Whether (and by how much) you should consider changing your spending budget or investment strategy in response to favorable or unfavorable experience (such as higher-than-expected inflation or poor investment performance)