Defined terms for the annuity market and lifetime income landscape.
The planning fallacy is the tendency to underestimate the time, cost, and difficulty of completing a future task, and to overestimate the likelihood that a plan will unfold as intended, even when past experience with similar plans should predict otherwise.
Planning horizon risk is the risk that an individual using solo drawdown selects a chosen planning age and outlives it, exhausting savings before death, and is the specific form longevity risk takes when income is bounded by a self-selected horizon rather than paid for life.
Point-to-point crediting is an indexed annuity calculation method that measures the change in an underlying index between two specific dates — typically the start and end of a crediting period — and uses that change as the basis for the credit applied to the contract.
A policy loan against an annuity contract is a loan from the carrier to the owner using the contract's cash value as collateral, with the loan balance reducing amounts available on withdrawal, surrender, or death, and with tax treatment differing materially from life insurance policy loans.
