Apart from borrowing and lending, the Torah’s moral framework encompasses the giving and receipt of tzedakah, a word which connotes righteousness.

Precedence for tzedakah goes first to one’s poor relatives, next the poor of one’s city, next the poor of the Land of Israel, and finally the poor of other cities. Poor Torah scholars also have precedence over other poor.[1] The principle is that you have more responsibility to care for the needs of those closer to yourself, by relation or by physical proximity, than those farther away. If their needs are fully met, you can turn your attention to Jewish settlement in the Land of Israel and Torah study, in both of which every Jew has a vested interest. One approach is to give a third of one’s tzedakah to the poor, a third to Torah scholars and yeshivot and a third to institutions that strengthen the Jewish people by addressing some unmet need, be it in health, special education, help for those in need of emotional support or other social or public goods such as synagogues.[2] One should consult his conscience and his rabbi.

Along with whom to give one’s tzedakah to arises the issue of who should take it. Just as the Torah requires us to help the poor, it enjoins the poor from seeking assistance when an alternative means of self-support is possible. As the Sages tell us, it is better to skin the hides of animal carcasses than to ask for charity, no matter how high one’s station and accomplishments.[3]

But as the poor will always remain a part of society, some will have a need to take charity. The rabbis estimated that anyone with enough money for a year’s worth of basic food and clothing, for oneself and one’s spouse, has no right to accept charity.[4] But someone using that money to make a profit can accept as much business capital as the circumstances in his time and place warrant.[5]

In principle, a poor person must be sustained in accordance with his standard of living, even if he had become accustomed to extravagances when previously wealthy. The Torah tells us to give him “enough for what he lacks.”[6] The goal of charity is to meet what the poor’s needs are, not to meet what the giver thinks his needs shouldbe.

While the rich may be able to dispense enough to meet this high standard, one who has limited resources for his own needs can’t afford to spend it all on charity. The Sages forbade someone who can’t afford to do so to give more than a fifth of one’s income to charity, absent a present need, lest the donor come to be in need of tzedakah from others.[7] Failing to give at least a tenth of one’s income, however, is regarded as miserly.[8] Thus while the Torah mitzvah of tithing relates to the produce of one’s field, tithing one’s income (ma’asar kesafim) is also regarded as obligatory.

Finally, how one gives charity is also significant. As mentioned above, the Rambam sees as the worthiest form of giving strengthening someone in his business, via a gift or loan, that will help him maintain his independence. So, for example, one could fulfill this by purchasing a service or product, perhaps at a higher than normal price, from someone who needs the business, providing the money he needs while sparing the recipient the shame of having to rely on handouts.

Other methods of giving find other ways to minimize the pain due to the embarrassing situation of accepting charity. By giving to the poor without knowing who is taking from it, the poor escape the shame of being a known beneficiary of charity. By giving anonymously, the poor are spared the feeling of indebtedness. Or by speaking kindly to the beggar, he is reminded that many reached his position through no fault of their own, and many of them later recovered financially.[9]

Other considerations include whether to give larger, more meaningful gifts or more numerous smaller gifts. These decisions require individual thought. The Rambam suggests for example that giving more frequent gifts carries the benefit of training one’s heart to be charitable.[10] And yet there are circumstances where the impact of a bigger gift is clearly warranted: for instance, redemption of captives has precedence over the ordinary needs of the poor.[11] Similarly in modern times, when the former Soviet Union relaxed restrictions on the right of Jews to leave for Israel, which then faced the astronomic costs of settling nearly 1 million people, a large sum was needed to meet all the immigrants’ needs quickly before a future leader might reconsider the move. Another way to donate impactfully is to seek to identify charitable organizations with small donor bases in which case one’s gift really makes a difference.[12]

Giving charity and tithing are not only to the recipient’s benefit, but the giver’s as well. The Sages tell us that the poor person does more for the donor than the donor does for the poor person.[13] In this spirit we may read such statements as “tithes are a protective fence for wealth”[14] and “tithe so that you may become wealthy.”[15] Adding an element of financial planning to charity, the Vilna Gaon is reported to have said the promise for wealth is limited to one giving a full fifth of his income to charity, while one who gives a tenth is promised only the preservation of his present wealth.[16]

The Sages say that a person’s income, as well as his losses, are decided on Rosh Hashanah, the yearly day of judgment. One who fails to give the amount expected of him will find it taken from him in less pleasant ways. In an illustrative tale, Rabban Yochanan ben Zakkai learned in a dream what loss his nephews were expected to suffer that year, and pressed them to give it to charity throughout the year. On the eve of Yom Kippur, the tax collector confiscated exactly what amount they had failed to give.[17]

Another story tells of a new heir whose greed turned him away from his father’s advice to tithe his field. As he began to reduce his tithing from one tenth to slightly less, so did the field decrease its production. This led him to again reduce the proportion of his tithes, upon which the field did the same. When his field finally reached one tenth of its original output, his family came to offer him ironic congratulations for his upgrade in social status – he was now receiving a priest’s due.[18]

The above stories illustrate the virtue, and necessity, of tithing. Charity comes from the heart, but tithes come from the pocket. The Torah demands we have pity for the poor person standing in front of us,[19] but doesn’t rely on however much compassion his plight manages to inspire in us. It gives guidelines as to what the correct amount of our wealth to give is, to balance our needs with those of the poor.

The Torah seeks an “olam chesed,”[20] a world of kindness, where we use our resources to strengthen the needy, through loans, gifts and tzedakah. Our goal is not to accumulate wealth but to use such wealth as we have been given to make the world a better place. As the prophet Yirmiyahu says: “let not the wealthy man boast of his wealth.” Of what may one boast? Knowing Hashem, “Who does kindness, justice and righteousness [tzedakah] on the earth.”

It is a cliché to say you don’t take your money with you to the grave. But by contrast, you do take your tzedakah with you to the next world. Perhaps the reason for its protective value is that one who gives tzedakah conditions himself to be a better person, and so becomes more worthy of lenience in judgment. Tzedakah thus pays: in this world and the next.

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[1] Shulchan Aruch Yoreh Deah 251:3,9.

[2] Rabbi Moshe Cohen, Aish HaTorah Los Angeles, noted having received this tradition from his teachers.

[3] Hilchot Mattenot Aniyyim 10:18.

[4] Rash, Peah 8:8.

[5] Shulchan Aruch, Yoreh Deah 253:2.

[6] Devarim 15:8.

[7] Ketubbot 50a.

[8] Hilchot Mattenot Aniyyim 7:5.

[9] The Rambam ranks eight ways of giving charity in Hilchot Mattenot Aniyyim 10:7-14.

[10] Commentary to Avot 3:15 (compare Hilchot Deot 1:5).

[11] Hilchot Mattenot Aniyyim 8:10.

[12] Recommended by HaRav Shimon Bollag, ztz”l.

[13] Rut Rabbah 5:9.

[14] Avot 3:13.

[15] Ta’anit 9a.

[16] Orchot Chayyim / Keter Rosh 123. The Vilna Gaon (commentary to Yoreh Deah 149:1; Shenot Eliyyahu, Peah 1:1) holds that tithing income is a Torah-level obligation. Other opinions who hold that only tithing produce is a Torah-level obligation are divided as to whether it is permitted to test God for blessing as a result of tithing income (see Rama, Yoreh Deah 247:4; Pitchei Teshuvah 247:2; Sedei Chemed, nun, 16).

[17] Bava Batra 10a.

[18] Vayyikra Rabbah 15:7.

[19] Devarim 15:7.

[20] Tehillim 89:3.

“We borrowed too much.” Those words could be written on the tombstone of Western civilization, whose current live-for-today mentality has utterly displaced the mindset through which its wealth and power were built.

A century ago, the U.S. was the largest creditor nation; today it is the largest debtor nation. That addiction to debt is fully reflected at the household level. Annual surveys conducted by Bankrate.com, for example, show that a substantial majority of Americans lack the necessary savings to pay for an unexpected $1,000 expense, such as an emergency room visit or major car repair. Survey respondents say they would charge the expense to their credit card and pay it off over time, thereby incurring biting interest-rate charges, or they would borrow the money elsewhere.

The problem with this reliance on debt is that, like maror at the Passover seder, it is sweet at first but becomes rather bitter as one’s consumption continues. Imagine accumulating a level of debt equal to one year’s income, but then, instead of getting that bonus you were expecting, you lose your job, while your day-to-day needs of course continue. In such a situation, the debtor may have to make harsh lifestyle changes or request a financial rescue from friends, family or community, thus becoming a burden on others. In short, excessive debt corrodes our self-control and diminishes our capacity to cope with financial pressure.

When Rabbi Akiva searched for a metaphor for the ephemerality of worldly goods, he found nothing more appropriate than the world of credit and debt: “Everything is given in mortgage, and a net hangs over all that lives.”[i] Apart from the allegorical meaning of his statement, the truth of its literal meaning has a firm basis in law. Someone who takes out debt he can’t repay exposes himself to losing all his property (or in the modern world, everything not sheltered via bankruptcy laws).

Materialism is embedded in human nature, but it has never had greater force than in our own times. We ought to understand that there are powerful commercial interests actively encouraging the belief that our wants are really needs. By the time you come home and see a $5,000 check pre-made out in your name courtesy of your credit card company, you have already seen a dozen ads egging you on to use that check for present wants, with worries about repayment kicked down the road.

One solution to this problem is to live in Israel where the consumer credit system does not permit this kind of heedless risk: credit charges in Israel are automatically deducted from bank accounts monthly, so consumers are kept on a short leash tethered to how much they have in their bank accounts currently. High-ticket items in the U.S. like education and healthcare, which are leading causes of debt accumulation, are also eminently affordable in Israel. (Of course, a Jew should live in Israel for more than just financial reasons.)

Regardless of location, we ought to conduct our financial lives wisely, apportioning income to both current and future consumption – rather than have consumption rely on current and future income, as is all too common today. In short, we must save for tomorrow rather than live for today.

That said, the Torah highly encourages lending and borrowing for kosher purposes. For example, the Torah requires providing loans to those in need. The loan is considered the greatest form of charity, because it preemptively obviates a future need for charity. The Sages compare a person struggling financially to a donkey whose burden is starting to slip. As long as the burden hasn’t fallen totally, it can be easily moved back into place. But once it falls off, even five people can’t replace it.[ii]

The Rambam[iii] expands this to providing any form of gift, loan, partnership or job. Any kind of support to a person who is in danger of financial ruin can help him avoid reliance on charity in the future. We can infer from this that it is a good idea for someone in danger of financially falling to seek or accept a loan, job offer or vocational training so that he not burden others as his problems deepen.

The Torah balances its encouragement of borrowing and lending to prevent poverty with discouragement or outright prohibition of certain kinds of borrowing, lending or transfer of monies that cross the line of propriety.

For example, the Torah forbids accepting a loan given at interest, and it prohibits any role in facilitating such a loan such as witnessing it, guaranteeing it or drawing up the promissory note.

The Torah places even more limitations on lenders, among them not lending at interest, forbidding pressing a borrower for repayment, forbidding the forcible taking of collateral, requiring the lender to return the collateral when the borrower needs it, not delaying returning that collateral when the borrower needs it, not taking collateral from a widow, and not taking cooking utensils from any borrower (as these are needed for his physical survival).

Conversely, the Torah expects of borrowers to repay their loan as soon as they have enough to do so. “Do not tell your friend ‘Go and come back and tomorrow I will give’ while you have with you.”[iv] The Talmud[v] teaches that repayment of the creditor is a mitzvah, one the courts are authorized to enforce should a debtor refuse to repay.

To summarize our discussion so far, the Torah’s framework for borrowing and lending is social and moral responsibility. Borrowing as is typical in contemporary society for the sake of consumption is a primrose path toward moral and financial bankruptcy. Rather, one should borrow funds when acquiring an asset that improves one’s balance sheet, even when accounting for the debt incurred. Merchandise acquired wholesale that can be sold at a profit on a retail basis, or secured debt such as a mortgage, would fit this criterion. If you can do that, then it is fair to say that you own something. If you can’t, then it owns you.

Unsecured debt, like a student loan for college on the other hand, would leave you extremely exposed. You can’t guarantee the sale of the intellectual capital you were supposed to acquire when in college to get back the value of the loan and then some, nor can you rely on governmental loan forgiveness, which in any event would not apply to private loans. It is more prudent to find cheaper ways to acquire a college education or pay as you go through a job.

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[i] Avot 3:16.

[ii] Rashi, Vayyikra 25:35 from Torat Kohanim.

[iii] Hilchot Mattenot Aniyyim 10:7.

[iv] Mishlei 3:28.

[v] Ketubbot 86a-b.

Kohelet (the Book of Ecclesiastes)frequently bemoans the worker who never stops working, and calls for a person to set aside labor to enjoy life with food and drink. In accordance with the literal meaning, moderate enjoyment of whatever gives you pleasure in life is called for. Indeed, the Sages have a sharp warning for ascetics: “In the future, a person will be held accountable for all that his eyes saw yet he didn’t eat.”[i]

But on a deeper level, the Sages interpret the terms “eating” and “drinking” throughout Kohelet as a metaphor for Torah and good deeds.[ii] Our retirement, really, should be a “re-Torahment” – a rededication to the good deeds and Torah learning that the demands of raising and supporting a family perforce scaled down.

This approach, based on the Talmud and the Rambam, provides a sure path toward success based on substance and personal discipline. The Western approach, apart from being increasingly unrealistic, always promoted fun while masking the downsides of a life without purpose. Studies have linked early retirements to higher rates of cognitive decline,[iii] memory decline,[iv] and illnesses such as dementia,[v] for example. How much better it would be to progress towards a stage where one can spend more time in the beit midrash (study hall) or in mentoring grandchildren while giving adult children some much-needed time off and more reliable babysitting resources. In so doing, a couple can also build a solid legacy through family and by playing a role in one’s community which, historically, was both the privilege and responsibility of a generation’s elders.

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[i] Talmud Yerushalmi, Kiddushin 4:12.

[ii] Kohelet Rabbah 2:24.

[iii] Jo Mhairi Hale, Maarten J. Bijlsma, and Angelo Lorentib, “Does postponing retirement affect cognitive function? A counterfactual experiment to disentangle life course risk factors,” SSM – Population Health 15, September 2021.

[iv] Sara Carmel and Aviad Tur-Sinai, “Cognitive decline among European retirees: impact of early retirement, nation-related and personal characteristics,” Ageing & Society, 2021.

[v] Anna Sundström, Michael Rönnlund and Maria Josefsson, “A nationwide Swedish study of age at retirement and dementia risk,” International Journal of Geriatric Psychiatry, 35, no. 10, October 2020.

If there is a single word that appears more frequently than any other in the personal finance literature, it is probably “retirement.” The milestone to which it refers is also the overwhelming focus of the multi-trillion-dollar financial services industry. And yet for all the storm and stress on this concept in contemporary Western society, the Torah is (seemingly) silent.

The reason for this is that retirement is a new phenomenon, made possible only in recent times by rising longevity, advances in health care and increased affluence. As recently as 1940, the U.S. average life expectancy[1] at birth was 61 for males and 66 for females, and the concept of retirement was just developing. It was in that year that the Social Security Administration, founded in 1935, began paying retiree benefits. Since Congress set 65 as the minimum age for receiving benefits, retirement was initially conceived as a short period of time. Private pension plans covered fewer than 1 million U.S. workers before 1950, so retirement was only taking its first baby steps around that time.[2]

But in the ensuing decades, life expectancy soared, averaging 74 for males and 80 for females in the U.S. at birth in 2021. More to the point, the life expectancy at the age of 65 is now over 40% higher, accounting for over 5 years of average life, than when Social Security began.[3] Since that time, retirement became a thing, fueled not just by the gains in health and wealth noted above, but in no small way by commercial interests, above all a financial services industry that attracts assets through the marketing of an idealized sort of retirement. Images of graying but physically fit couples at the beach, gazing over a bridge in Paris, flying a kite or golfing became regular features of Madison Avenue’s ad portfolios.

These kinds of pastimes are not as cutting-edge as we might suppose. Rabbi Eliezer Papo wrote in his musar book Pele Yoetz 200 years ago of similar attitudes in his own day. The elderly, after living a youthful life of wild partying, think it fitting to live the same life in an elderly form: sitting with other old people, chattering about money and politics while smoking hookah and drinking coffee.

Travel adventures, massages and golf are extravagances that might make life more pleasant but not more meaningful. These escapist thrills, when they become the focus of life, detract from the wisdom and dignity of the elderly. Not that there is anything wrong with any of these activities per se, but the overall ethos of juvenile partying for a decades-long stretch is exactly the opposite of Torah thought on aging.

The Pele Yoetz recommends a different kind of life. Instead, he says, conscious of the impending Day of Judgment, one should use his remaining time more wisely:

He should cleave to sages and books that teach man knowledge. And he should open his eyes to all his issues, and not waste precious time while he is free…All that is in his power to do, he should do: rectifications, learning, mitzvot and good deeds at an increasing rate, until he separates from the vanities and pleasures of this world and conducts himself with piety, that he might gain favor and say, “Fortunate is my old age which atones for my youth.”[4]

You’re not likely to see anything like that in your mutual fund retirement brochure!

The Torah only seemingly does not address retirement because retirement, in its modern form, is a new and perhaps passing fad. For all too many, the U.S. retirement dream is becoming something of a nightmare. This is because it takes an awful lot of money to support daily living for decades without work, such that retirement systems are strained to the breaking point at every level. U.S. Social Security is no longer self-sustaining, and will soon be unable to pay out full scheduled benefits – which are already tightly strained in providing for everything a retiree needs, not only in food and shelter, but also in medical care or home health aids, which cost hundreds of thousands of dollars over the course of retirement,[5] something pre-retirees don’t always take into consideration. So Social Security is clearly far from sufficient.

The various state pensions and corporate pension plans – for those lucky enough to be participants – are similarly stretched, and a disturbing trend we’ve seen in recent years is that some of them have tried to make up for this funding gap by investing their portfolios more aggressively. Many large institutions collectively adopting such an approach introduces greater systemic risk to the financial system, which has proven to be crisis-prone.

If the public pension systems cannot be relied upon, households must bear a greater share of the burden, but there too we have massive underfunding for retirement through 401(k) and similar plans, while consumers run up higher and higher personal debt and homeowners turn their houses into brick-and-mortar credit cards by borrowing against the equity in their homes.

These dystopian trends suggest that the blessing of a long life may turn into the curse of becoming a burden on adult children who themselves are struggling to maintain their households. In other words, the glamorous retirement we’ve all been promised may turn out to have been a brief historic interlude, for all but the wealthiest Americans.

(Global pension systems across the globe are strained, but we use the U.S. as a representative example. In fact, all countries with large Jewish populations – the U.S., France, Canada, the U.K., Argentina, Russia, Germany, Australia and Brazil rounding out the top 10 – have more problematic national retirement systems than Israel’s, where, despite its deficiencies,[6] retirement is more achievable for citizens of average means because the health care is essentially free and the banking system discourages taking on excessive debt.)

In light of these very real trends, it appears that the Torah’s guidance on aging exactly corresponds with reality by establishing a framework of mutual responsibility, whereby the older generation must avoid burdening their children, who in turn must exert themselves to support parents who lack the means to do so themselves.

Torah law provides for old age by prescribing that children support their elderly parents, if they are unable to support themselves. Unlike Social Security, expenditure of resources is only required when the parents actually lack the resources to provide for themselves, and the expenses are borne by the children rather than the community. Only if one made it to old age without the resources needed to ensure independence are younger family members called upon to assume responsibility for their basic needs, and only if the children are incapable of providing for their parents is recourse made to charity from communal funds. The Rambam brings this as a son’s halachic obligation to his parents:

What is honor? Providing food and drink, dress and clothing, from the father’s property. If the father lacks money but the son has, he is compelled to sustain his father and mother to the extent he is able.[7]

The Rambam adds that though we are commanded to assume financial responsibility for our parents who cannot do so for themselves, “a person is forbidden to lay a heavy yoke on his sons.”[8] While the Torah grants parents with no property the right to demand basic provisions from their children, they are not only discouraged but also disincentivized from doing so, as the expenses fall on their future heirs first of all.

Putting this together with what we have learned from the Rambam about lifecycle financial planning, we can frame “retirement” thusly. While we can and should set positive goals for ourselves, it is wiser to start with a “first, do no harm” perspective. That is, we should above all plan not to become a burden on our family and community. Therefore, to avoid a problem that could affect one-third of one’s life, we need two things: income and assets. Young people should be consciously thinking about this and planning this before marrying.

This is especially true in the U.S., where it is now common for young people to begin their adult lives saddled with student loan debt averaging $33,000.[9] (Once again, this is not generally a problem in Israel where higher education, religious or secular, is affordable.) Young people should not start out life with a crippling level of debt. Rather, they should work hard to get a scholarship or work hard to fund a yeshiva or university education program themselves, and of course think about why they are pursuing such an education so that they not waste time and resources.

To summarize all of this, what currently goes under the name of retirement may be better thought of as organizing one’s financial life to achieve financial independence. This is accomplished by living within one’s means while reserving a portion of one’s income for the future purchase of assets such as a home, a rental property and a stock index fund. With these assets, a household can withstand financial crises that occur from time to time and generate income that can finance current needs when one no longer wants to work or no longer can work. This ensures the asset owner will not become a burden on his family but to the contrary can leave a legacy through tzedakah or bequeathal to heirs.

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[1] Period life expectancy data from The 2022 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds, Office of the Chief Actuary, 2022,

[2] Alfred M. Skolnik, “Private Pension Plans, 1950-74,” Social Security Bulletin 39, no. 6 (June 1976): 3-17,

[3] Life expectancy at age 65 was 11.9 for males and 13.4 for females in 1940. In 2021, life expectancy at age 65 is 16.9 for males (42% higher) and 19.5 for females (46% higher).

[4] Pele Yoetz, entry Zaken.

[5] “How to plan for rising health care costs,” Fidelity Viewpoints, May 25, 2022.

[6] For more information, see the annual Mercer CFA Institute Global Pension Index, which benchmarks 43 retirement income systems around the world.

[7] Hilchot Mamrim 6:3.

[8] Hilchot Mamrim 6:8.

[9] Justin Song, “Average Student Loan Debt in America: Facts and Figures,” ValuePenguin, accessed August 2, 2022.

We have looked at the difference between taking risk (investing) and managing risk (insurance). We also saw how the Talmudic portfolio is a form of risk-managed investing, and that, beyond asset allocation, diversification within each asset class (“distributing portions”) further manages risk. Another tool investors may utilize to manage risk is an annuity.

Annuities are often marketed by investment professionals, but they are insurance products, meaning to say they normally come with a guarantee. There are many different kinds of annuities, and this is not the place to sort them all out; moreover, many of these products are sold more than they are bought, and come with high fees. Yet in economic theory, and often enough in actual practice, annuities may play a highly constructive role for consumers seeking to manage risk.

What risk do they manage? Think of them as the opposite of life insurance (which really should be called death insurance, but was likely given a positive spin for marketing purposes). Whereas life insurance pays a benefit upon the insured’s death, that is to say, it manages the risk that a family’s breadwinner prematurely dies, an annuity manages the risk that the beneficiary will live; in other words, it manages longevity risk.

This could be very comforting to someone of moderate means who retires at 65, but fears he may live until 95. How would he pay for all of the expenses of life for three decades without working?

As we will see in the next chapter, public pensions, such as Social Security, are failing, and private savings are woefully inadequate. Social Security is an annuity. It pays a benefit up until the time you die. A consumer therefore can take a portion of his savings and give it to an insurance company, which will provide an income stream (specified in the annuity contract) for the rest of the insured’s life. If he lives long, he will have received more than he paid to the insurance company. If he dies young, the insurance company has profited.

Consumers are often reluctant to purchase annuities because of a desire to bequeath their wealth to heirs. However, the goals of supplementary income and bequests needn’t be seen as a conflict. One can annuitize a portion of one’s portfolio. Those whose wealth can last 30 years need not purchase an annuity at all. Those of little means probably cannot afford one.

(The income you receive is proportionate to the amount of money you hand over to the insurance company, adjusted based on underwriting. Just as a smoker is not seen as a good risk for life insurers, a person in tip-top health would be a poor risk for an annuity provider.)

In effect this means that these products are out of reach for those who would most benefit from them. For that reason, we note here one (of a great many) types of annuities that might be the most relevant (and affordable) in managing longevity risk, and that is a deferred income annuity. The key word is “deferred.” Instead of handing over a chunk of your savings and then collecting monthly payments immediately, the payments are preset to begin when you reach an advanced age. Deferring the start date squeezes a lot of the cost of the pension and can also increase the benefit received because it shortens the term of payments and only kicks in at a time when life expectancy is greatly reduced.

Such a product could be a perfect solution to the problem discussed in the next chapter of adult children whose aging parents lack the means of supporting themselves. The children can step in to purchase the deferred income annuity, possibly even spreading out the payments over many years prior to the payout phase. If the parent lives a long life, the two generations’ retirements need not be in conflict.

A professional acquaintance, who happens to be an economist, reported he did just that for his mother when she was in her late 80s. He said his siblings initially questioned the wisdom of the idea, but no longer did so since, at the time he related this, she was already 96.

One final point about insurance: We have already noted that investment thinking (taking risk) and insurance thinking (reducing risk) are different. This may suggest that the approach that works in the former can be counterproductive in the latter.

When it comes to investing, paying less is generally a key to smart decision-making. That’s why investors pay such close attention to various ratios such as price-to-earnings, price-to-book or price-to-sales. The ratio is essentially telling us how much we are paying for a unit of equity, with the idea being that spending $10 for a unit of earnings is better than spending $20 for that same unit of earnings. Similarly, investors pay a lot of attention to expense ratios, preferring to pay as little as possible for the management of their money.

But it is facile to think that being a savvy consumer means getting the best price when it comes to insurance. How often have you, or someone else you know, expressed frustration that when you finally needed your insurance company, it found some reason not to pay the claim? We pay premiums so that, if we bear a loss, the insurer will make us whole. That means that, above all, we should not be looking for the lowest premiums but at the company’s financial stability and its record of paying claims.