A product that’s been around since the 1600s is the key to retirement says a leading expert on pensions.
A product that’s been around since the 1600s is the key to retirement says a leading expert on pensions.
“I believe tontines and annuities should be a (bigger) part of the retirement income cocktail,” says Moshe Milevsky, the author of King William’s Tontine: Why the Retirement Annuity of the Future Should Resemble its Past. “The only way for individuals in society to afford the retirement they dream of is for them to embrace the idea that the dead (retirees) should subsidize the living (retirees.).”
A tontine is when a group of investors pool their investments and one by one their shares are forfeited as they die until there’s a sole survivor who gets the entire portfolio.
Tontine annuities make periodic distributions to surviving investors, but unlike traditional tontines, tontine annuities add new investors replacing those that have died. By doing this they can carry on indefinitely.
Milevsky believes that tontine annuities should be added to the list of products that typically are used by investors to save for retirement. These old-school annuities do a good job spreading risk.
“The risk is shared by the pool itself,” says Milevsky. “The company guarantees nothing. They are merely custodians and managers.”
“Longevity risk should be shared. I encourage baby boomers and their children to enter into a longevity-sharing pact with others in their cohort so that the assets and wealth of the deceased can be used to enhance the returns of the living,” says Milevsky. “You can extend the longevity of your money and your portfolio if you embrace tontine thinking.”
“I believe tontines and annuities should be a (bigger) part of the retirement income cocktail,” says Moshe Milevsky, the author of King William’s Tontine: Why the Retirement Annuity of the Future Should Resemble its Past. “The only way for individuals in society to afford the retirement they dream of is for them to embrace the idea that the dead (retirees) should subsidize the living (retirees.).”
A tontine is when a group of investors pool their investments and one by one their shares are forfeited as they die until there’s a sole survivor who gets the entire portfolio.
Tontine annuities make periodic distributions to surviving investors, but unlike traditional tontines, tontine annuities add new investors replacing those that have died. By doing this they can carry on indefinitely.
Milevsky believes that tontine annuities should be added to the list of products that typically are used by investors to save for retirement. These old-school annuities do a good job spreading risk.
“The risk is shared by the pool itself,” says Milevsky. “The company guarantees nothing. They are merely custodians and managers.”
“Longevity risk should be shared. I encourage baby boomers and their children to enter into a longevity-sharing pact with others in their cohort so that the assets and wealth of the deceased can be used to enhance the returns of the living,” says Milevsky. “You can extend the longevity of your money and your portfolio if you embrace tontine thinking.”
