Page 127 - Ready Set Retire

Ready. Set. Retire!

$100 ÷ .50 = $200

Now apply this to lifetime income. Your bookie knows that
half the people will die before the 17 year mark. He also knows
half will still be alive. So, if you give him $180,000 for income
after age 82, he knows he only has to pay that out one-half the
time. That means the cost to your bookie of paying $18,000
per year is:

$18,000 x .50 = $9,000

So the bookie could afford to provide a guarantee of $18,000
a year for $9,000 and expect to break even, as long as he got to
keep the $9,000 for each person who doesn’t make it. (Tt’s
actually more nuanced than this as not everyone who makes it
to 82 will live 10 years. Many will die in year one. Others will
die in year two, etc.; but the model is sound and you get the
idea.)

Remember, however, this is only for life after life expectancy.
Life before will have varying degrees of probability, ranging
from close to 100% for year one, and approaching 50% near
life expectancy.

And it only works if you leverage those odds. You must make
the bet NOW, not wait until you are 82. If you wait until 82,

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