If you are financially savvy, or can pay someone else to be, does it not make more sense to invest your money yourself? There are a number of "too big to fail" companies, like GM, and Wells Fargo, that offer dividends. If you composed a portfolio of high dividend, stable, stocks... Could you theoretically have a "guaranteed" monthly income AND the ability to liquidate, in the event of an emergency?
With a stock portfolio, the only guarantee cash-flow is dividends since capital appreciation varies a lot year-to-year. Dividends are usually in the 2-3% range. A large, diversified real-estate portfolio might see 8-15% yearly returns in cash, which can be distributed, saved, or reinvested as needed.
No. You can buy an annuity, or US Treasury bonds, but guaranteed high returns don't exist, and adding in a liquidity requirement doesn't help.
Note that GM declared bankruptcy in 2009. Even if it is still "too big to fail," that doesn't mean investors can't lose all their money.
My comment was to address the question regarding why more people don't use annuities, and I'm not sure your response counters that.
Regarding GM, yes, I'm aware they went bankrupt. But correct me if I'm wrong - Investors didn't lose their shares? The government bailed them out, and they're operational today. That's what I mean by "too big to fail".
http://www.fool.com/investing/general/2016/02/23/what-a-corp...
The whole point is to transfer money from worlds where you die early to worlds where you die late. An annuity does this by pooling your money with many people living to different ages. For a large pool and accurate actuarial tables, the number of people who die every year can be predicted, so one can determine an amount of money to pay out each year such that each surviving person gets the same amount each year, with long-surviving people getting more total money (as desired).
Economists have long said that the rational thing to do is to buy an annuity. At retirement age, you could pay an insurance company $100,000 in return for some $5,000-6,000 a year in guaranteed payments until you die. But most people don’t do that. For decades, economists have been trying to figure out why.
James Poterba, an economics professor at MIT who has extensively studied American retirement, says it’s still a mystery why annuities are so unpopular. A number of theories have been advanced — people might like to leave some money for their children, or they might worry about medical expenses late in life. Poterba and his colleagues have also pointed out that Social Security is already like an annuity, promising constant payments for life.
But there’s also some evidence that people just irrationally dislike annuities. As behavioral economist Richard Thaler wrote in the New York Times: “Rather than viewing an annuity as providing insurance in the event that one lives past 85 or 90, most people seem to consider buying an annuity as a gamble, in which one has to live a certain number of years just to break even.”
Here is where tontines come in. If people irrationally fear annuities because they seem like a gamble on one's own life, history suggests that they irrationally loved tontines because they see tontines as a gamble on other people's lives.
I agree that financial literacy in the US is low, and the basic accounting/finance classes should be required at the high school level, but this article is good and draws upon a decent amount of actual economic literature. I recommend reading it to the end.