This article was first posted January 1, 2020.
MBAs may recognize him as the creator of the Sharpe ratio, but Professor William F. Sharpe has now turned his attention to helping middle-class workers with their retirement income.
Professor Sharpe provides a free 730 page e-book "Retirement Income Analysis with scenario matrices" you can download at the link below where he details his methods.
Perhaps the most interesting idea he presents is the need for some kind of longevity insurance product that provides the investment returns of the equity market to the retiree -- the "Tontine Annuity" (page 282).
A tontine is a financial instrument where each participant pays an agreed sum into the fund, and thereafter receives an annuity. As members die, their shares devolve to the remaining participants, and so the value of each annuity increases. On the death of the second to last member, the remaining value of the tontine is paid out to the last surviving member and the books are closed.
I've long criticized Single Premium Life Annuities because of the 15% to 20% of the premium paid that's lost to the insurer's various fee, expenses and costs. (See link: The high cost of a no-fee, no-commission Single Premium Immediate Annuity (SPIA). Since the mortality table and investment risk is retained by the annuitants in the Tontine Annuity, costs should be much lower -- perhaps approaching what you'd see in a low-fee index fund given sufficient economies of scale.
Resources for additional information.
Nobel Prize-Winning Economist on How to Solve the ‘Nastiest, Hardest Problem’ in Retirement, Barron's Nov 16, 2019
Retirement Income Analysis with scenario matrices, William F. Sharpe, Stanford University (730 page e-book)
TONTINES: A PRACTITIONER’S GUIDE TO MORTALITY-POOLED INVESTMENTS, CFA Institute
Social Security Administration website