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novalis comments on Why is it rational to invest in retirement? I don't get it. - Less Wrong Discussion

20 Post author: diegocaleiro 16 May 2013 01:28AM

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Comment author: novalis 16 May 2013 03:50:49AM 5 points [-]

I wonder if there are any death insurance companies, where you give them your retirement savings, and when you retire they pay you money continuously until you die. That way, they can pay you extra to take into account that you might not live that long.

Yes; they are called annuities (well, some types of annuities work this way).

Comment author: RomeoStevens 16 May 2013 08:19:37AM 0 points [-]

Wait annuities are tontines? Cool.

Comment author: novalis 16 May 2013 04:16:40PM -1 points [-]

Not precisely tontines. For variable annuities, your return depends much more on the market (highly unpredictable) than on the deaths of other members (highly predictable, in aggregate). For fixed annuities, of course, your return is fixed.

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