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Since the cost of longevity insurance is less than you would have to save to meet your post-age-85 needs, it's the most efficient way to cover the risk of living past 85. So, why is it considered "expensive?"

Well, first off, the standard way of figuring your portfolio withdrawal ratio uses 30 year survival. 65 + 30 = 95, so this is the age (IMHO) that you should be looking at.

Second, the killer for annuities (longevity insurance) is inflation. At 2.5% inflation, the buying power after 30 years is cut in half. So you actually need face value of twice as much longevity insurance as you think you need.

the point of insurance was to cover low-probability, high-cost contingencies. Doesn't living to 100 fit that description?
Actually, to cover low-probability (but not miniscule probability) events that you cannot sustain the cost of. This is true of house fire insurance--but I'm not sure that it is true of reaching age 100. Likewise, this is true of house fire insurance, but not true of "getting struck by a meteor", since the probability is so low.

For a population of 79,684 65 year olds, only 754 of them are alive at 100 (SSA tables). How much would you pay for insurance that will pay out only if you are one of the lucky 0.9%? For 99.1% of the people, the insurance will never pay out.
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