Annuities and life insurance is how an individual gains
access to the risk pool you are describing.
Re:The Investor Class Hates Pensions
by dragontamer on Monday March 05, 2018 @06:03PM
(#16525374)
Or pension plans. Which essentially combine an Annuity with a Retirement Fund.
Life Insurance is weirder. Its more about leaving money left over for your family, especially if you die earlier than expected and your family will need a source of money to sustain themselves after losing you.
There are more benefits to this than you might think. In particular, its easier to spread death statistics across larger populations than against individuals.
We can reasonably expect 50% of men to die before they're 78.74 (life expectancy in the USA). A Pension Fund (since it is pooled across many individuals) can plan for this very well. True, life-expectancy changes from year to year, but this slow-moving change can be corrected over time.
An individual 401k however, has no real way of planning for the event. Realistically, individuals need to have a plan for death at age 60 and death at age 100. On the one hand, you may die before you have a chance to even crack your retirement fund, but on the other, you may die in extreme poverty, with all your money wasted away years before you die.
Planning for your age of death is damn near impossible on an individual basis. A 401k would be innately less efficient than a pension fund as we all have to plan far more conservatively. IE: A Pension Fund can plan for an age-of-death at ~80 years old (for males), while an individual male may need to plan for 85 or maybe 90 years old.