The Washington herald., 1913-09-20
EATING UP HIS WHOLE
ESTATE TEACHES LESSON
Annui6es and Their Proper Sphere.
Their Relation to Sound
Invasfuanks
InYesfments.

Copyright. 1913. by c. NJ Keys. New York;
A newspaper dispatch from New
Haven. Conn. tells now a man named
John c. Anderson disappointed the pub
lie by leaving an estate of a valuation of
only sl95Oo0 when il had been confidently
expected that il would be worth between
s. 2O0o. 900 and $3.OOO.Oo0 The dispatch went
on to say that the great depreciation in
the estate was due to unwise real estate
Investments and to the purchase of an
nuities.
Taking the statement at its face value,
IL forms a good basis for a description Of
an annuity and the discussion of the eff
feet of buying annuities and the COM
mon sense or otherwise of investment OF
this sort.
Mr.. Anderson in all probability figured
out for himself a long time ago that he
wanted an absolutely safe income Of
certain amount. irrespective of his busi-
ness. He then appropriated a certain
amount of his wealth and bought annu-
tiles to yield him every year the amount
he wanted.
The popularity Of an annuity is that
il pays an income of a certain stipulated
amount each year so long as its owner
lives, but il absolutely Cancelled ana
ceases 10 exist when the owner dies.
Suppose, for instance, that MIR. Ander-
son had paid a $1,000 for annu-
tiles and had died a year later, after
receiving one yearly income. The annuity
would then be cancelled. Perhaps the
income paid would only have been nOo,-
oO0 1t might have been more and might
have been less. depending on the age OF
Mr.. Anderson at the time when he bought
it In such a case, clearly the estate
loses 100000
II, on the other hand. Mr.. Anderson
lived for fifty years after buying his
annuity of 100000 a year, he would have
done better than an ordinary investment
could have done for him in the matter
of income, but the estate would, of course,
not have anything to snow for the origi-
nal s, 200, 600 invested.
Clearly the annuity is a special kind of
investment which serves an excellent
purpose IL it is used in the right way. out
which might be a very bad form OF III
vestment IL bought by man without ful
knowledge of its terms.
The writer knows of a case where
man of forty-five put practically all his
money into an annuity. He was wld-
over, without children, and he figured
that what he wanted was a certain in
come for the rest of his life, because he
had no business and did not work for
living. The income which he secured was
about $4,000 year. Two years later he
married. He was fifty-one when he died.
leaving a widow and two children. The
family had lived on the income Of $1,000.
When he died his estate consisted OF
practically nothing, because the annuity
which had furnished the income was can
celed. 90
In that case the annuity was very ex-
cellent investment for him. as man
alone In the world; but IT was utterly
unsuitable for an investment for a man
with a family to support and look out for.
Annuities are really suitable for the
investment of elderly people who have no
one to look out for after their own death.
II an annuity is bought for young per-
son. II means very little more than fair
rate Of interest on It's cost. and that rate