Tontines

[Chuckanut]

Here is an interesting transcript of a NPR show done yesterday (10/26/17) on the subject of Tontines and how they might help people with retirement expenses:

A Case For Tontines, A Morbid Mix Of Retirement Plan And Lottery : NPR

URSTADT: In this original version, the government of a city said, listen, rich citizens, give us a pile of money and we will pay you a regular payment kind of like interest. But there is one dark twist. As investors in the group die, their payments go to the survivors who get bigger and bigger payouts, which is perfect for retirement.

<snip>

FORMAN: All I really need is somebody to hold the money, somebody to hold the box that we each contribute a thousand dollars to and somebody to keep track of who's alive and who's dead.
URSTADT: And that's the beauty of a tontine. It's just a pile of money that writes you a check that gets bigger until you die. And then you don't need it anymore.

And this article that is somewhat more critical but still has a good dicussion of the advantages of a tontine:

https://www.washingtonpost.com/news...vings-scheme-may-be-the-future-of-retirement/

“This might be the iPhone of retirement products,” says Moshe Milevsky, an associate professor of finance at York University in Toronto who has become one of the tontine’s most outspoken boosters.

This is the nightmare scenario: If someone dies the day after she buys an annuity, the insurance company walks away with the cash scot-free. In a tontine, that money passes on to help fund other people's retirements. (Depending on how psychopathic you are, this is either a positive feature or a murder incentive.)
To think about it a different way, a tontine is like an annuity in which the middleman has been cut out -- another advantage that tontines have over annuities, proponents say.

I am wondering what is the calculation they use for the yearly payout. Presumably that would have to be spelled out in detail.

 

[RunningBum]

There was a previous discussion on this here http://www.early-retirement.org/for...-the-future-of-retirement-tontines-78890.html if anyone wants to see what was previously discussed. Not saying this should have been added to that older thread since there was a new NPR bit on it, just pointing out an old discussion.