When defined benefit plans were popular most retirees lived on a pension that was an annuity. That can still happen but today the retiree needs to sponsor the annuity, or (s)he can buy non-insured annuity-like investments

1. Not Your
Grandfathers’
Annuity &
Other Risk
Mitigators
Baby Boomer Investing Show
Tuesday, 4/6/21
Replays Anytime
https://www.youtube.com/watch?v=CNlQU1T24bw
• Annuities Pros & Cons
• ZIRP
• New world for insurance cos.
• Alternatives
John W. O’Brien
Adjunct Professor at UCLA Anderson School of Management

2. Investment?
Insurance?
“DBizing” a DC Pension Plan

3. Zero Interest Rate Policy (ZIRP)
History of Fixed Annuity Rates

4. New world for insurance cos
Profit Squeeze
Insurance
Subsidiary
Bermuda
Reinsurer
Asset Manager
Parent
Private Equity Firms Are Buying Annuity Contracts
From Insurance Companies and Increasing Profits by
Investing in Collateralized Loan Obligations (CLOs) &
Commercial Real Estate-Backed Securities (CMBS).
8% of Industry, or $350 billion

5. Alternatives
Structured
Products
Guaranteed Minimum
Withdrawal Benefits
(GMWB)
Tontines
Defined
Outcome
Pockets of
Money
TRIPs

6. Structured
product.
Democratization
of options
GEMs

7. Guaranteed withdrawals
Guaranteed Minimum Withdrawal Benefit (GMWB)

8. Defined Outcome Exchange Traded Funds (ETFs)

9. Tontines
Last survivor gets all

10. Pockets of money: Line up stacks of money today to meet
objectives in the future

11. U. S. Treasury STRIPS
STRIPS is the acronym for Separate Trading of Registered Interest
and Principal of Securities. STRIPS let investors hold and trade the
individual interest and principal components of
eligible Treasury notes and bonds as separate securities.
... STRIPS are called “zero-coupon” securities.
TIPS bonds can also be stripped, in which case the value of the
principal payment at maturity (and the coupon payments as they
come due) is adjusted up or down by the CPI-U over time.

12. Behavior of Treasury STRIPS Over Time
Bond A
$925
Bond B
$975
Maturity
$1,000
Maturity
$1,000

13. Target Retirement Income Plus:
One unit of a TRIP buys $1 per year in retirement

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