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Oct 31, 2020

Retirement Tontines: Classical finance for retirement

by J. Mark Iwry, Claire Haldeman, William G. Gale, David C. John

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We explore how a classical finance mechanism—the tontine—could help retirees manage
their assets. Tontines are investment pools where members commit funds irrevocably and where
the interests of members who die are given to those who survive. Tontines were popular in the
U.S. in the late 19th and early 20th centuries, until they were effectively prohibited in response to
insurance company mismanagement. Tontine-inspired products are receiving renewed attention
around the world as efficient, transparent ways to finance retirement. Unlike fixed income
annuities, tontine pooling does not guarantee future payments, but should pay more on average
per dollar invested, with less costly regulation.

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