kwri10s: you're absolutely right. Actuarial tables take those varying life expectancies into account. My example is even rosier than real life. The older one waits to start the annuity, the shorter the payer has to pay it. The pension benefit obligation (PBO) takes declining life expectancies into account. The PBO is the amount fedex must be able to pay to cover existing possible pensions. It is defined by law.

Looking at the PBO shows the main reason why Fedex has such a HUGE incentive to move this to the right. The PBO hasn't changed, but as the R and I guys just reported, the pension fund's value has been significantly reduced. How do you think fedex is going to make up the difference? They push the terms of our pension to age 60 defining early retirement, with a 3%/year reduction for going early, and they just made up all that money they need for the obligation. Problem solved.

I kept the mortality age fixed in my example to allow people to see how the present value of the annuity changes with varying start dates. In reality, the older one waits to start, the lower the present value will be, as life expectancy drops.

Our only hope is to renegotiate the terms now, otherwise everyone who planned on going at age 60 will now be doing it at a 15% reduction in their annuity. I, for one, don't want to wait around and see that happen.