Proposal for an Innovative Security for Retirees

Journal of Retirement (JOR), Forthcoming

https://doi.org/10.3905/jor.2016.4.2.037

Posted: 21 May 2019

See all articles by S. Gowri Shankar

S. Gowri Shankar

University of Washington, Bothell School of Business

Date Written: August 4, 2016

Abstract

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

Shankar, S. Gowri, Proposal for an Innovative Security for Retirees (August 4, 2016). Journal of Retirement (JOR), Forthcoming, https://doi.org/10.3905/jor.2016.4.2.037, Available at SSRN: https://ssrn.com/abstract=2828360

S. Gowri Shankar (Contact Author)

University of Washington, Bothell School of Business ( email )

18115 Campus Way NE
Bothell, WA 98011-8246
United States

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