This is a subject that people need to know more about. It is a practical method of old-age pensions. Annuities are just the opposite of life-insurance. They protect you against living too long instead of too short a time. They protect against outliving one's income or earning capacity.

Although annuities are just the opposite of life-insurance they are sold by life-insurance companies and are based on the same scientific principles. Usually a person deposits say one thousand dollars or five thousand dollars or any other lump sum, with an insurance company and then the company guarantees a fixed income as long as the annuitant lives. The older a person is the larger the income. A man of sixty will get perhaps nine per cent. on his money as long as he lives.

Usually the insurance company keeps what remains of the sum paid in if an annuitant dies soon. That is the chance the old person takes.

But by paying a little more the company undertakes to refund to the heirs such moneys as have not been expended. Of course if a person lives to be unusually old then he or she wins and the insurance company loses. Annuities are really best suited for old persons in good health who have no dependents or heirs. For such they are the best investment.

It is an interesting fact that annuitants as a class live longer than other persons, partly because only those who believe themselves to be healthy buy annuities, and partly because they are generally purchased by persons leading quiet and retired lives. It has been stated that the expectation of life for men of the age of fifty generally is twenty and eight-hundredth years, whereas for female annuitants it is twenty-four and two-tenths. Thus annuity rates for women are always slightly higher than for men, because they live longer.

Just what can be done with annuities is best shown by a letter which I once received from an inquirer. This gentleman is sixty years old and his wife is fifty, and he wants to provide for her old age in case she survives him. Now, the basis on which annuity rates are figured is much the same as that upon which life-insurance is calculated, that is, a mortality table, and the compound interest principle, three or three and one-half per cent. being the rate of interest allowed. The inquirer says this is too low a rate of interest, because he has investments which yield eight per cent., and he believes the company merely takes one's money in trust, to pay back in annual instalments, and "them betting on a sure thing."

To answer these objections in full would require a discussion of the entire theory of life-insurance; but suffice it to say that the chief factor in both insurance and annuities is safety, not a profitable investment. Of course, the insurance company is not betting on a sure thing. The man of fifty-five who pays one thousand dollars for a life income of seventy-three dollars, or the man of sixty who pays one thousand dollars for a life income of eighty-five dollars, may live to be eighty-five or ninety years old, in which case the life-insurance company loses most decidedly. Figure it for yourself. The company only bets on a sure thing in the average, not on the individual.

But, granting that a man of sixty feels that eighty-five dollars a year is too little for the rest of his life in return for a lump payment of one thousand dollars, what else can he do? He could have bought what is known as a deferred annuity, if he had thought of this subject twenty years ago. That is, a man of forty, in return for a lump sum of five thousand nine hundred and nine-one dollars and sixty cents can buy an annuity beginning at the age of sixty to pay him one hundred dollars a month from then on as long as he lives. But if he dies between forty and sixty no return will be made.

However, my inquirer did not think of doing this when he was forty. What else can he do now? If he has no children or relatives to whom he desires to leave something, and merely wishes to protect his wife in case she survives him, he can buy a survivorship annuity, a form largely written in England, but less well known here, although some companies write it. In this case he begins at the age of sixty to pay the company eight hundred and twenty-seven dollars and twenty-five cents a year. This sum he pays as long as he lives. Should his wife die before him there would be no return to any one, but if she survives him she will receive from the time of his death one hundred dollars a month as long as she lives.

Another practical form of survivorship annuity is that which costs little and enables a young man to protect his mother or other relatives. For example, a man of twenty-five years of age for thirteen dollars and twenty-one cents a year can provide an income of one hundred dollars a year for his mother of fifty-five, beginning at his death and lasting as long as she shall live. Should the young man survive his mother he receives no return for his investment, but there are many cases where, if a young man knew he could absolutely protect his mother for such a small sum of money, he would be glad to make the investment.

Another method, and perhaps one of the best, would be for the man to take out an ordinary or whole life-insurance policy with his wife as beneficiary, the payments to be made to her, not in a lump sum when he dies, but in annual instalments for a fixed number of years certain, say from ten to twenty, and then to be continued during the remaining lifetime of the beneficiary. This is a form of insurance being more and more employed.

Either the cash refund annuity (or straight life annuity where there are no heirs), or the ordinary insurance policy payable to the beneficiary in instalments instead of in a lump sum, is the surest provider against poverty in old age. The annuity should be taken out when one is old but vigorous, and insurance when one is young or middle-aged. Few indeed are the men or women who do not need one or the other form of old-age protection.