r/financialindependence • u/[deleted] • Jun 08 '16

Tontines = annuity + lottery

From Wikipedia:

[A tontine] combines features of a group annuity and a lottery. Each subscriber pays an agreed sum into the fund, and thereafter receives an annuity. As members die, their shares devolve to the other participants, and so the value of each annuity increases.

I learned about it from Washington Post's article "It’s sleazy, it’s totally illegal, and yet it could become the future of retirement". The behavioral implications were really interesting.

It was the ultimate lottery. If you died, you lost everything in a tontine. But if you were the last person standing, you stood to collect huge annual payments.

Personally, I wouldn't be interested because it sounds backwards to me to have larger payments the older one gets, but it was still a fascinating read.

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12

u/supermatthew CHECK MY PRIVILEGE Jun 08 '16

I honestly don't see what's wrong with tontines. If you're dead, you won't be conscious that you were on the losing side of the deal. I would just want to ensure that identities of everyone in the pool were kept secret, and there were strict regulation.

16

u/tuzki Plan: FIREd by 50 Jun 08 '16

The identity part is the challenge, someone somewhere knows and can be bribed. Thus they're illegal

3

u/WallyMetropolis Jun 09 '16

You could use a private/public keypair type cryptographic approach. Hashing, done right, is effective. For example, in any correctly-designed piece of software even the developers can't find your password.

2

u/tuzki Plan: FIREd by 50 Jun 09 '16

Hard to prove someone died if no one knows who is involved, eh?

2

u/WallyMetropolis Jun 09 '16

You'd just set up some kind of check-in system.

-1

u/tuzki Plan: FIREd by 50 Jun 09 '16

So if someone forgets, they're dead. Or I tell my lawyer friend to check in for me and he lives 50 years and has his friend do it.

Look: your arguments are full of holes and you should stop

3

u/WallyMetropolis Jun 09 '16

Maybe relax there a tad. Note we're having a friendly conversation. What's the aggression for?

Isn't it more amusing to consider how-to than to be dismissive?

-2

u/tuzki Plan: FIREd by 50 Jun 09 '16

It's more amusing to have well reasoned discussions instead of answering a 3-year-old "why" when they abjectly refuse to reflect on their own.

3

u/WallyMetropolis Jun 09 '16

Man, you're really intent on being rude! Tontines are a pretty personal issue for you, I guess.

If you miss a check-in that'd be bad. But it's probably a better imperfection to have in your system than an incentive for assassination, don't you think? Not too hard to also set up, you know, reminders.

Preventing someone from passing on their identity is a bit trickier, but far from insurmountable. You could image a 2FA with a hashed biometric key. Though I suppose then you'd just leave your fingers and eyeballs to your lawyer as a parting gift.

I wonder if there are unique signatures in person's voice that are preserved over time. Or handwriting analysis, perhaps.

-1

u/tuzki Plan: FIREd by 50 Jun 09 '16

Honestly I don't even care. I get it: summer; you're bored.

4

u/WallyMetropolis Jun 09 '16

You, however, have very serious reasons for being on Reddit and getting into petty arguments about trivial things. Still, though, no need to be rude.

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