How do pension providers project your annual pension, since they don’t know when you are going to die?
In: Economics
There is a field called actuarial science that specializes is analyzing data to project average life expectancies and expected future payouts, etc. Pension providers rely on this information to figure out how much they need to put away today so that they’ll have enough money to make the payments in the future. In many cases pension providers don’t have to “pre-fund” their pension payments. They just pay cash out of pocket in real-time.
Insurance companies also use actuaries to analyze medical costs, frequency of claims, life expectancies, etc. This is how they know how much to charge for an insurance policy.
Latest Answers