Tontines may make sense despite their history of disrepute
I don&#x27;t see how this is really different from an annuity beyond getting a bonus payment when someone dies and not being funded in a way that you&#x27;re sure the money won&#x27;t run out prematurely.<p>With an annuity, a company sells you a plan that will pay you $X&#x2F;mo for a lump sum of $Y.  Those that die below actuarial estimates end up paying in more than they get out while those that continue living get the profits from it.<p>I guess the difference is that with an annuity, you&#x27;re expecting the monthly payments to be pretty close to what you&#x27;re paying in over a normal life expectancy.  So, a million dollar annuity with a 10-year life expectancy might net you $8,000-$8,500&#x2F;mo.  By contrast, a tontine would see you put in a million dollars and then maybe get $3,000 per month with a 10-year life expectancy with those that outlive others getting more money as time goes on.  So, if you live long and others die, your payment might go up to $10,000 or $15,000.  Is that the point of the tontine?<p>But why on earth would that be the future of retirement?  An annuity is predictable.  The risk is borne by the company selling it.  With a tontine, you get unlucky and everyone lives long and you&#x27;re in a bad situation.  In the best case, your payments go up, but why would you want the chance at $10-15k after others have died rather than $8k predictably always?<p>An annuity already spreads the risk and uncertainty of life expectancy.  That&#x27;s the problem we&#x27;re trying to solve.  An annuity already lets you profit off those who die early who have paid in more than they take out - and if you live long you get more than you paid in.  If you want to add the morbidity of the tontine to your retirement plan, take out life insurance policies on your friends and cash in when they die young and lose money if they live a long life.  Combined with an annuity and you basically have the tontine.  You get regular payouts from the annuity and you profit when your friends die via life insurance policies on them.<p>But looking at that, why bother with the life insurance policy?  Why wouldn&#x27;t you just get the annuity and have a predictable, steady income?<p>* You might not like companies that sell annuities and think they aren&#x27;t a good investment.  However, they&#x27;re sound compared to some hacked-together, crowd-sourced thing that isn&#x27;t backed by someone reliable with deep pockets.  I won&#x27;t personally buy an annuity, but they&#x27;re based off spreading the risk in a conservative enough way to guarantee predictable funds (along with a reasonable profit for the company).  An under-funded tontine that has people live longer than expected would simply run out of money and leave people destitute.