What’s the difference between stocks, savings, and annuities?

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Saving and investing for retirement is a massive topic, and the fact that everyone’s situation is different means longevity planning isn’t one-size-fits-all. While we can’t give you personalized financial advice, we can provide an overview of common longevity planning products, including stocks, savings accounts, and longevity annuities, such as AgeUp. We’ll also cover the benefits and drawbacks of each, and what separates AgeUp from other longevity annuities on the market.

Stocks, savings accounts, and longevity annuities all have a reason to exist, and for some, a combination of all three might make sense in a retirement plan. While there are many things to consider, we’re focusing on four aspects that are especially important when it comes to longevity planning: securitypotential return on investment (ROI)liquidity, and lifetime income.

We’ll start with some definitions:


We’re using “security” to mean the risk of losing your initial investment, rather than a guaranteed return. For example, money kept in a no-interest checking account won’t grow, but it is exceptionally secure. There’s virtually no chance of losing your principal, barring fraud or total economic collapse.

Return on investment (ROI)

Return on investment, or ROI, is a simple equation used to evaluate an investment’s performance. To calculate ROI, simply divide your net profit by the cost.

We obviously can’t tell you what the return will be for a given stock or other investment, so for our purposes, we’re only talking about potential ROI. Money deposited in a standard savings account has a lower potential ROI than a vast majority of investments, while a stock purchase could grow exponentially in a short period of time. Typically, investments with a high potential ROI also carry significant risk of loss of principal.


Liquidity is a measure of how easily an asset can be turned into cash without substantially affecting its price. Money in a savings account is exceptionally liquid. Stocks can vary, but are usually fairly liquid, while real estate and longevity annuities generally have very low liquidity.

How security, ROI, and liquidity fit together

If you’re familiar with cheap/fast/good “pick two” diagrams, you’ll have a good idea of the relationship between security, liquidity, and ROI. Some financial products are very liquid and have a high growth potential, but come with a lot of risk. Some are secure and have a moderately high potential ROI, but are illiquid. What you won’t find is a product with all three. (If you could, there’d be no reason to look elsewhere.)

Pick two: security, liquidity, and potential return on investment

Lifetime income

What happens if you plan for your retirement savings to last 25 or 30 years, but you live for 35 or even 40? It’s more likely than you might think. One in three of today’s 65-year-olds will live past 90, and one in seven will live past 95. Some experts even think upcoming medical advances have the potential to make living past 100 the norm.

That’s great news, but with private sector pensions all but extinct and trouble looming for Social Security, a separate source of guaranteed lifetime income may be more important than ever. A lifetime income guarantee doesn’t fit neatly into the security/liquidity/ROI group above, but it’s something you should consider as you plan for your retirement.

Investment comparison chart: Equities - low security, high ROI, moderate liquidity, no lifetime income. Savings: High security, low ROI, high liquidity, no lifetime income. Longevity annuities: high security, moderate ROI, no liquidity, lifetime income yes.


Stocks, also called equities, are shares of ownership in a company. The more shares you have, the larger your ownership stake in the company.

Pro: High potential ROI

Over the long haul, investing in the stock market can bring higher annual returns than a large majority of financial products. While past performance is no guarantee of future performance, historically the market has grown at around 10% a year on average. At that rate, your money will nearly double in just 7 years. After 15, your money will have more than quadrupled, and after 25 years, you’ll have over 10 times what you started with.

Pro: Liquidity

Stocks aren’t the most liquid investment type out there, but most shares can be converted to cash fairly quickly in case of emergency.

Con: High risk

Nothing in life is free. With stocks, you pay for higher potential investment returns with a much higher level of risk. The long-term outlook might be generally positive, but when you zoom in, things may not always be so rosy on Wall Street.

You can mitigate some of the risk by owning fewer shares of more companies, or by choosing mutual funds over individual stocks. But scaling back your risk also means reducing your potential reward, and widespread economic downturns could still cause your investments to plummet.

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Savings accounts

This one you’re hopefully already familiar with. In exchange for your deposit, the bank pays interest at a given rate. You’ll often see the interest rate listed as an “annual percentage yield,” or APY, which is the total return over the course of one year. For example, if you deposit $1,000 into an account with an APY of 0.05%, you’ll have $1,000.05 after a year.

Pro: Security

The most obvious benefit of a savings account is security. At FDIC-insured institutions, your account is insured up to $250,000. That means your deposit is safe, even if the bank collapses. If you have more than $250,000, you can spread your deposits among different banks for even more protection.

Pro: Liquidity

Keeping money in a savings account means you’ll almost always have ready access to your funds. If there’s an emergency, you can simply make a withdrawal.

Con: Low potential ROI

As of April 2020, the interest rates on simple savings accounts are well below 0.1% at most national banks. Bank of America’s Advantage Savings accounts currently range between 0.01% and 0.06% APY, while Wells Fargo’s Platinum Savings accounts currently have an APY of 0.05%. (Like we mentioned earlier, a 0.05% APY means one nickel per $1,000 per year.)

Those figures are far below historical U.S. inflation rates, so even though your balance will continue to slowly grow, the real value of your account will steadily decline. In essence, the longer you save, the less you can buy.

You can trade some liquidity for a higher ROI by choosing a certificate of deposit (CD), which is similar to a savings account, but pays a higher interest rate in exchange for not being able to withdraw your money for a set period. You can also find significantly higher interest rates if you’re willing to look at online banks – some as high as 1.7% APY (as of April 2020). That’s a huge improvement and comes close to keeping pace with inflation, but still doesn’t allow for an increase in purchase power.

Con: High liquidity

Yes, we know we mentioned this as a positive, and it is. But there’s also a downside to such easy access – the more liquid an asset is, the easier it is to spend. If you’re very disciplined with your finances, this isn’t an issue. But for many of us, having a roadblock or two in front of our retirement savings can be helpful.

Longevity annuities

At their most basic, annuities are a contract between you and an insurance company. With income annuities, in exchange for your payment (either a lump sum or series of payments), the insurer agrees to pay you in the future. Beyond that, income annuities are far too varied to discuss as a single item. Some begin paying immediately, while some have a long waiting period. Some pay a fixed amount, and others are tied to market performance. The list goes on. For our purposes, we’ll only discuss longevity annuities like AgeUp.

Longevity annuities, also known as deferred income annuities, are designed to guard against longevity risk, or the chance of outliving your retirement savings. In exchange for your purchase payment(s), the insurer will pay you guaranteed income starting at a future date. Some longevity annuities pay for a set number of years, some until a specific age, and some are guaranteed to pay for life (as is the case with AgeUp).

Pro: Security

Depending on the annuity and options you choose, a longevity annuity can be either extremely secure or very risky. Most offer an option to return your purchase payment(s) to a beneficiary if you die before payouts begin or before fully recouping your money. (Look for something called return of premiumrefund optiondeath before payout age, or the like.)

Electing a money-back guarantee will make a longevity annuity very secure, but it will also reduce the size of your payouts if you do live long enough to begin receiving them. Which option you should choose depends on whether you’d rather minimize risk or maximize your potential future income.

Pro: Lifetime income

This is the primary reason longevity annuities exist, and is perhaps their biggest benefit. While the potential future income can be very high, it might be more helpful to think of longevity annuities as a sort of deferred pension, rather than an investment. Millions of baby boomers will live into their 90s and beyond, but few have sufficient savings for 30 years of retirement. Longevity annuities can be an affordable way to purchase peace of mind, guaranteeing a base level of income that you can’t outlive.

Pro: Potential ROI

Calculating the ROI from longevity annuities is a bit more complicated than other saving and investment vehicles. You can know the return on a savings account before you even make a deposit,
although rates may vary. With stocks, your ROI may rise or fall in the future, but you can calculate it at any given time. But the lifetime income of a longevity annuity means there isn’t a defined value, so the ROI is entirely dependent on how long you live.

We’ll use AgeUp for an example. If a 65-year-old man purchases AgeUp with a monthly premium of $50, sets the payouts to begin at age 93, and declines the return of premiums if he dies before then1, he’d pay a total of $16,150 by the time he’s about to turn 92. (Premium payments stop 13 months before the payouts begin, so $16,150 = $50/mo x 26 years, 11 months.) When he turns 93, he’ll receive an estimated $1,4282 per month for life. The chart below shows what the total ROI would be if he lives for one, two, three, four, and five years after payouts begin.

Longevity annuity potential ROI example (AgeUp)
After: Payout amount Total contribution Net ROI
1 year $17,136 $16,150 $986 6.1%
2 years $34,272 $16,150 $18,122 112.2%
3 years $51,408 $16,150 $35,258 218.3%
4 years $68,544 $16,150 $52,394 324.4%
5 years $85,680 $16,150 $69,530 430.5%

Wondering what would happen if you put the same $50 a month into a savings account instead? Below are the results from a typical and a high-yield savings account, using the same $50/mo deposit for 26 years and 11 months. At 0.05%, the total would come to $16,260. If you chose a high-yield savings account with an average APY of 1.5%, you’d have $19,907. We’ll also allow them to collect interest for additional 13 months to match the AgeUp example, for ending balances of $16,269 and $20,233 respectively after 28 years.

Savings account ROI (0.05% APY)
Ending balance Total contribution Net ROI
$16,269 $16,150 $119 0.74%


High-yield savings account ROI (1.5% APY)
Ending balance Total contribution Net ROI
$20,233 $16,150 $4,083 25.28%

Con: Security/ potential ROI

In our earlier chart comparing the strengths and weaknesses of stocks, savings, and longevity annuities, we listed security as “high” and potential ROI as “moderate” for longevity annuities. Those two factors are interdependent, however. Like we mentioned above, a longevity annuity can be very secure, but that will reduce your potential future income. Or you can choose to maximize your potential future income, at the cost of added risk. As with almost everything, the more security, the lower the return, and vice versa.

Con: Liquidity

This is a longevity annuity’s biggest weakness. Unlike a savings or investment account, there’s no principal and no defined value, so longevity annuities can’t be easily traded or sold. For that reason, longevity annuities should be a small piece of your retirement planning, rather than your first and only means of support. On the other hand, a lack of liquidity can be helpful when it comes to longevity planning. The harder it is to access the money, the more likely it is to be there when you retire.

How AgeUp is different

Even within the subcategory of longevity annuities, there can be dramatic differences. Typical longevity annuities require an upfront payment of at least $10,000, and the average single contribution is over $180,0003.

AgeUp is designed to be accessible to almost everyone, with payments made over time in flexible installments starting at just $25 a month. Even if you chose to double the minimum payment and instead pay $50 per month, the total invested would be just $15,000 after 25 years. That’s less than 10% of the average longevity annuity single contribution.

AgeUp minimum initial payment: $25. Typical longevity annuity minimum initial payment: $10,000. AgeUp is paid in monthly installments, typical longevity annuities are bought with a one-time lump sum. AgeUp payouts begin between 91-100, while a typical longevity annuity can only be deferred to age 85.

Because longevity annuities can’t be sold or cashed in, once the purchase is made, your money is locked away until payouts begin. But since AgeUp is purchased in flexible monthly installments, you don’t have to commit a significant sum up front. The monthly premium payments can be increased, decreased, or even paused if money is tight, then resumed when your finances improve.

AgeUp also has a longer deferral period than typical longevity annuities. Most begin paying out no later than age 85, but AgeUp payouts begin at any age you choose between 91 and 100. The longer deferral period allows for more monthly income than a typical longevity annuity, dollar for dollar. And since the total invested is much lower than a typical longevity annuity, more people can afford the longer deferral period before payouts begin.

  1. When applying for AgeUp, you’ll choose from one of two “death before payout age” options:Choosing “yes” guarantees that you’ll get back at least what you put in, no matter what. If you die before your target payout age, 100% of the premiums you’ve paid to that point will be returned to your beneficiary. However, your payouts will be smaller if you do reach your target payout age.If you choose “no” for the “death before payout age” option, there’s no return if you die before payouts begin. There’s a chance you could lose your premium payments, but your payouts will be larger if you live to your target payout age.
  2. Estimated monthly payouts based on rates from May 1, 2020. Rates are subject to change.
  3. The average deferred income annuity premium was $181,000 in 2018. Source: LIMRA Secure Retirement Institute, “Annuity Buyer Metrics Summary Report,” 2020


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