Mutually-assured-destruction fund

The problem: even if average retirement savings were adequate, a few long-lived individuals would outlive their savings.

Mutual funds with stocks and bonds have the potential to keep ahead of inflation. But to supply enough income indefinitely, you need to invest a lot more money than if you were able to use it up during your lifetime. The problem, of course, is that you don’t know how long you’ll live.

A possible solution would be a mutual fund where, when one member died (presumably of natural causes), his shares would be distributed among all members older than he was. You wouldn’t need to invest enough money to last to age 100, say, because the longer you lived, the more shares you would inherit from shorter-lived cohorts. This is essentially an inverted pyramid scheme, so it would complement conventional pension programs, which tend to pay less, or perhaps nothing -- it's hard to audit a promise of future benefits -- as one ages. Earnings would be distributed, but principal could not be withdrawn. Heirs would lose the chance of inheriting money from a conventional mutual fund, but wouldn’t have to worry about supporting an unexpectedly long-lived parent. Furthermore, ensuring life-long financial security at a relatively modest cost might free up assets that could be invested more aggressively and inherited by heirs.