investors, but unlike traditional tontines, tontine annuities would
funds, tontine annuities, and tontine pensions could work today.
This plan is not necessarily optimal within a classical life-cycle model with no bequest motives--in which continuously renegotiated tontine annuities
are available--as originally demonstrated by Yaari (1965) and recently extended by Davidoff, Brown, and Diamond (2003).
These tontine annuities would still be volatile because of fluctuations in the value of the underlying investment assets, but backloading would be eliminated.
In the simple tontine annuities we have considered so far, we have assumed that contributions do not earn any interest.
We are confident that discount brokers would be able to offer tontine annuities at even lower costs.
Department of Labor's Employee Benefits Security Administration to regulate tontine annuities and the fiduciaries that would manage them.
To be sure, underutilization would be a problem for tontine annuities, just as it is for traditional annuities.
In short, as with traditional annuities, tontine annuities would be underutilized.
In short, the solution to adverse selection is to cover a broad group of individuals, and in the next Section, we show how a large employer could overcome the adverse selection against tontine annuities by adopting a "tontine pension" for a large group of its employees.
While tontine annuities would be attractive investments in their own right, they are likely to be as underutilized as traditional annuities and other lifetime income products.
Although not a certainty, it appears that tontine funds, tontine annuities, and tontine pensions are all legal.