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Author: madbrain Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 81635  
Subject: Re: Drop Stocks, Buy an Annuity? Date: 7/12/2011 10:07 PM
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But clearly, anyone with even a casual interest in managing their own savings will lose a big chunk of it if they turn those savings over to an insurance company. And when you think about it, it must be that way. Consider, an insurance company...

1. ...invests in the same stock and bond markets we alll do. Yes, at a different scale, but still the same market

Well, insurance companies do pool the risk of longevity.
Some people will buy an annuity, die shortly after, and therefore lose big on their upfront premium. This can be profit to the insurance company, or part of it can also be redistributed to other policyholders who end up live longer.

So, it's conceivable the returns will be higher than just investing your premium amount in the stock market - as there may be more money for your benefit in the same stock market, from the dead policyholders. This assumes of course that the insurance company's profit doesn't take this completely away from you.
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