Proposal for an Innovative Security for Retirees
Journal of Retirement (JOR), Forthcoming
Posted: 21 May 2019
Date Written: August 4, 2016
I advocate for the issue of a new US Treasury security to help retirees with modest savings earn a safe, steady retirement income. The proposed new security would pay out both principal and interest as an inflation-adjusted annuity over 20 or 25 years, in contrast to traditional bonds that pay interest periodically and return the principal at maturity. I further propose that private financial institutions can and should create such an annuity synthetically, using a laddered Treasury bond portfolio, and offer it to retirees. Retirees would be able earn an inflation adjusted income by investing in this security and in a deferred income (longevity insurance) policy, without the stress of managing a retirement portfolio, or irrevocably committing their savings upfront in an immediate annuity.
Keywords: Retirement income; TIPS; innovative security; deferred annuity; inflation adjusted annuity
JEL Classification: G11, G23, J26, J32
Suggested Citation: Suggested Citation