Could “Tontines” Expand the Market for Longevity Insurance?

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The brief’s key findings are:

  • Annuities offer one way for retirees to turn savings into lifelong income, but these products are expensive.
  • A less expensive alternative advocated by some finance experts is a “tontine,” a product that does not currently exist in the marketplace.
  • A tontine would offer investors regular payments that start out smaller than an annuity payment, but grow over time for those who survive to older ages.
  • However – unlike annuities – tontines do not insure against the risk that investors live longer than expected on average, which would reduce the size of the payments.
  • If tontines did exist, they would likely make the most sense as part of a larger portfolio that also includes some liquid wealth and annuities.