Encore: Could tontines be an alternative to annuities?

We have a new brief on “tontines.” People get quite excited about this topic, so it’s good to know what they are talking about.

A big challenge facing retirees is how to draw down their nest egg in retirement. The main consideration is insuring against “longevity risk” — the possibility of outliving one’s savings — without unduly restricting spending. One solution is to buy an annuity, but few people actually do it. One — among many reasons — is that annuities are expensive. For this reason, some policy experts have begun advocating an alternative form of longevity insurance, called a “tontine.

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