The March 4, 2013, issue of Forbes covers the theme, "Retire Rich." We’d all like to do that. The question is, how? One of the articles had a title that sent me to my dictionary. It was called "Think Tontine." Here is what I found when I looked up the definition.
Author William Baldwin opened his article asking, “Would you be interested in a strategy that yields 10% or better annual payout during retirement?” In a zero interest rate world that might appear to be an impossible to attain goal.
Baldwin explained the idea of a deferred annuity. One of his examples showed figures attainable by putting up a lump sum at age 60 while waiting to take any distributions until 10 years later.
These annuities are not tontines. Buyers will be paid set monthly amounts for life beginning at the selected age rather than having simply the last sole survivor getting the whole pile of money.
The double-digit numbers listed in the Forbes article suggest really good percentage returns based on the initial lump-sum payment.
After checking out the deferred annuity’s details, things don’t look nearly as positive. Here are the promises for that, "Buy annuity at 60, start collecting income at 70" example. Note: Women would receive less per month than men due to their longer average life expectancies.
Keep reading: Investigate Before You Invest – GuruFocus.com.
