How Artificial Intelligence Will Affect Annuities

How will artificial intelligence affect annuities?

This is timely.

And I’m going to say it plainly.

Artificial intelligence is going to affect annuities because it is going to affect life expectancy.

That matters because lifetime income annuities are priced primarily around how long the insurance company expects to pay you.

Key Takeaways

• Artificial intelligence may shorten the timeline for medical breakthroughs
• Longer life expectancy can lower future lifetime income payouts
• Lifetime income annuities are priced mainly on life expectancy, not interest rates
• AI and GLP-1 medications may both affect longevity assumptions
• Current lifetime income guarantees may look better if future payout tables change
• For lifetime income, carrier quality matters, A+ rated or better

AI Is Shortening Medical Breakthrough Timelines

Artificial intelligence is already changing how medical research works.

The issue for annuities is not AI writing songs, books, or taking over office work.

The issue is medical breakthroughs.

If AI helps people live longer, then life insurance companies will eventually adjust their life expectancy tables.

And when those tables change, lifetime income pricing changes.

Why Life Expectancy Matters

Lifetime income annuities are transfer-of-risk products.

That includes:

• Single Premium Immediate Annuities
• Deferred Income Annuities
• Qualified Longevity Annuity Contracts
• Income Riders

You transfer the risk to the life insurance company, and they agree to pay you for as long as you are breathing.

If you live to 100, they pay.

If you live to 125, they pay.

If AI makes people live longer, the insurance companies have to price that into the guarantees.

Longer Life Expectancy Means Lower Payments

This is the key point.

If life expectancy gets longer, the insurance company expects to make payments for more years.

That usually means:

future payments go lower.

Same bucket of money.

Longer expected payout period.

Lower payment.

That’s how the math works.

GLP-1s Could Add to the Shift

AI is not the only factor.

GLP-1 medications may also affect longevity if they help people lose weight and improve health outcomes.

If more people live longer because of medical breakthroughs, weight loss drugs, better surgeries, and improved treatment, annuity companies will eventually adjust.

This Is Not About the Fed

A lot of people think lifetime income pricing is all about interest rates.

It is not.

Interest rates matter, but they do not drive the train.

Life expectancy drives the train.

If you are waiting for Fed rates to move before buying lifetime income, you may be looking at the wrong thing.

Why Current Guarantees Could Be a Bargain

At the time of this taping, lifetime income guarantees are priced using current life expectancy tables.

If those tables eventually move against you, today’s guarantees could look very strong later.

That is not a sales pitch.

That is the math of longer life expectancy.

Carrier Quality Matters More

If people are going to live longer, then carrier strength matters even more.

For lifetime income, the rule is simple:

A+ rated or better.

You are marrying that company for life.

If AI extends life expectancy and payments last longer, you need the carrier to be strong enough to back up the claim.

What You Should Do Next

If you are considering lifetime income, the next question is:

What would today’s guaranteed income numbers look like based on your age and timeline?

That’s something you can compare using our annuity calculators here: https://www.stantheannuityman.com/ annuity-calculator/

The Bottom Line

Artificial intelligence will affect annuities by affecting life expectancy.

If AI helps people live longer, annuity companies will adjust future pricing.

Longer projected life expectancy usually means lower future lifetime income payments.

That is why locking in contractual guarantees now may matter if lifetime income is already part of your retirement plan.