Individual Tontine Accounts

Our latest research involves a collaboration with Michael J. Sabin to introduce the concept of an individual tontine account (ITA). An ITA is similar to a conventional investment brokerage account, but with the added feature of mortality pooling through participation in an open-ended fair tontine. In showing them to be fair to all participants, we envision ITAs as complementary to individual retirement accounts (IRAs), allowing retirees to derive extra income from savings without taking additional investment risk and to obtain lifetime income at a lower cost than with insurance products. ITAs represent an efficient new solution in addressing retirement needs and may help address the “annuity puzzle” by providing a more transparent, lower-cost alternative to insurance-based products.

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