Just a reality check. Am I missing something obvious?
In the case of a 65-year-old woman, the Longevity Risk Premium Fixed Income Fund 2045 65F is priced at $20.98 per share and has a "Fund Liquidation Date" 25 years from now.
So for $20.98 she gets a total payout of $25. If she dies in less than 25 years, she might have received a total of more or less than $20.98 in payments. If it was more she gets "cancellation on death," the payments simply end. If it was less, she gets a final "mandatory redemption" payment that brings your total up to $20.98. So it is like a "return of premium" or "cash refund" annuity.Until the earlier of the Fund Liquidation Date or the last scheduled distribution date on which the Fund has assets to distribute, the Fund intends to make a distribution each month equal to $0.0833 per outstanding share of the Fund, for a total of $1.00 per share per year.
So for, say, $209,800 she gets $10000/year for 25 years, with "return of initial purchase price" if she dies earlier.
A vehicle that explicitly warns of
in which case, too bad, that's a risk you choose to take, andRisk that the Fund Will Run Out of Assets Prior to the Fund Liquidation Date.
For a quick estimate, I looked at a Social Security life table. According to this table, a 65-year-old woman has a chance of 29,503/87,855 = 34% of living more than 25 years and thus outliving the fund. The population that buys annuities is longer-lived than that, but, at any rate, 25 years isn't even close to being income for life.Distributions provided by the Fund are not guaranteed or otherwise backed by an insurance company or by any third party. Therefore, if the Fund is wrong in its assumptions or actuarial estimates or the Fund’s investments lose money, then at any time, you may not receive monthly distributions as described below, and you may lose any or all of your investment that has not already been distributed to you.
According to immediateannuities.com--and their web illustrations have been decent approximations to real annuities you can actually buy from them--
--for $209,800 a 65-year-old woman can buy an annuity that provides payments of $910/month = $10,920/year, not $10,000. She will get those payments for life, not just 25 years, so she has a 34% chance of getting payments for longer than with the Stone Ridge Fund. Like the Stone Ridge fund, there is a guarantee she will at least get her initial payment back. And it's insurance, and so if the actuaries screwed up that's the insurer's problem, they still need to pay what they contracted to pay.
Why is the Stone Ridge fund interesting?