Yet another strategy might be to buy a deeply deferred annuity that doesn’t start payments until age 90. A 65-year-old man investing $100,000 today could receive approximately $65,000 of annual income for life starting at age 90.
That sounded surprisingly underwhelming to me. The 2016 SS period life table (why don't they update this more frequently?), indicates that for every 79,893 men who reach age 65, only 18,303 (22.9% of them) achieve age 90. Then at age 90, a male survivor has a further life expectancy of 4.08 years.
So tying up $100,000 of today's dollars for a 22.9% chance of receiving an expected $65,000 in 2044's dollars + $65,000 in each of 2045's, 2046's, and 2047's dollars, plus 0.08 * $65,000 in 2048's dollars (with a 77.1% chance of dying before age 90 and therefore receiving zero) doesn't seem remotely close to being actuarially fair, even making allowances for profit and administration. At a 2% annual discount rate, the PV of the expected payout on the $100,000 annuity is $35,923. At 1.5% it is $40,925, and at 1% it is $46,654. Even at 0%, not a remotely realistic discount rate an annuity provider would use internally, it is only $60,756.
Looking at higher discount rates - and over 25 to 30 year spans, rates have averaged over 2% - at 2.5% such an annuity would have a PV of only $31,554, and at 3%, only $27,735.
I am all in favor of longevity insurance - I plan to take SS at 70 - but the example provided in the HumbleDollar column, if it is realistic, makes this seem like a sucker bet. $100,000 today could be much better invested against tail-end risk.