Brian Sozzi: Welcome back to Market Catalyst. I'm Yahoo Finance Executive Editor of Brian Sozzi. Back here at Apollo Global Management, there's a growing crisis in this country and it has to do with the fact that we're all getting older. Me included, and I can't even believe it. The rapidly growing population plus a growing savings gap has sparked an urgent demand for guaranteed lifetime income. One tool to help close that gap are annuities. And here with me to go through the benefits of annuities is Mike Downing, Athene Co-president.

Mike, good to see you here. The stats around retirement are, they are absolutely mind-blowing. 40% expected increase in the number of people aged 65 and over in the next 25 years. Set the stage for us. How does that impact a business like Athene?

Mike Downing: So from a business standpoint, it's just incredibly large demand for annuities today because of the growing retirement population and it's inevitability. Everybody's getting older, the population's getting older. And not only are they getting older, they're living longer. And one of the challenges of traditional defined contribution savings is retirees or people planning for retirement running out of money. And that's where annuities can really come in and save the day is help close the gap and actually create spending confidence at retirement.

Brian Sozzi: As I look at your business, you mentioned people scared about running out of money. Is that one of the biggest fears they have right now when you talk to retirees?

Mike Downing: It is. And it's a real fear. It's well over half, fear running out of money, it's about 64%. And it's a real fear because most savers have enough, just enough, and a market downturn could mean they don't have just enough. And to give you a sense as to the power of annuities, in terms of just a punchline, if you have a million dollar nest egg, if you integrate that with that nest egg with annuities, that million dollars can feel like one and a half million from a spending standpoint. So think about that in terms of spending powers. So that's how annuities can come in and translate from nervous retirement to confident retirement, surviving versus thriving.

Brian Sozzi: What mistakes do you still see retirees make?

Mike Downing: Twofold. One is underspending. And so that's a fear of running out of money, and that's where annuities can really close the gap is they can guarantee that lifetime income to the extent the actual assets run out. That's what insurance companies do guarantee it. And the second is not early enough purchasing of annuities. Big benefit annuities is tax deferral. Tax deferral is a young person's game, not an old person's game.

Brian Sozzi: How can you get young people to get excited about retirement planning? When I talk to 25 year olds, "Retirement planning? I'm never going to get old."

Mike Downing: So one of the great things about annuities, it makes it simple. There's lots of different flavors. You can get a simple product that's just a guaranteed rate times a term. Think of it as a CD, but instead of a CD, it's earning about 200 basis points more every year. Super simple, super easy to do. Second are, there's types of products that guarantee principle, but you still get equity upside. So you can still participate in the market, but guaranteed downside protection, but largely, it's peace of mind. So if you don't want to think about retirement, annuities can really help you get peace of mind and help deliver your retirement for you.

Brian Sozzi: You talk to a lot of people. Do you get the sense sub 30-year olds are planning well for their retirement better than my generation? I'm an aging millennial.

Mike Downing: Yeah. I would say it's a mix. And one of the things we're starting to see is we're starting to see a younger group of buyers starting to buy annuities and that's positive, but it needs to continue to go lower just to take advantage of that tax deferral.

Brian Sozzi: It's not lost on any of us today's Fed decision day in America. The Fed is likely to cut interest rates by 25 basis points. Maybe follow up with one more early next year. Whatever the case is, what will lower rates mean to the retirement industry?

Mike Downing: So people still have to save, right? And the rate environment is more or less where do you put your money? And so regardless of rates, annuities are still a very valuable option because ultimately, they'll still outperform CDs. They'll outperform CDs in any market. They will provide guaranteed downside protection in any market as opposed to the S&P. And so we see demand continuing to grow simply because of the growing aging population. And we've already seen it today. Rates are well off their peak highs. Demand is still incredibly strong for annuities.

Brian Sozzi: Rates lower for longer. Do you think people are going to have to take more risk? Are they going to be forced into taking more risk if they want to earn returns? It's been easy. Easy the past two years. Dump your money in CD, earn what? 3 or 4%? Make a good return, call it a day.

Mike Downing: Yeah. I would say rates lower for longer. There's a temptation to take more risk. And again, that's where a really smart, integrated annuity strategy. Think of, again, a typical saver that's going to get to about a million dollars. 30 to 40% of that, put that in a nice basket of annuities. Completely protects you from low rate risk, as well as volatility risk.

Brian Sozzi: We saw this year, President Trump sign an executive order that could allow 401ks to invest in private equity. Is that the next big catalyst for this industry?

Mike Downing: So 401ks is clearly... So by background, I'm a pension actuary. I watched the DB industry decline.

Brian Sozzi: I've talked to you before, you are the man in this industry. You're the man.

Mike Downing: Watched it decline for 30 years. So what is DC? It's a 12 and a half trillion dollar pot of retirement money with no protection. It needs annuities inside of it. And the second thing it needs is differentiated returns. Right now, the way the DC market works, it's migrated to just all index funds, nothing uncorrelated with the S&P. So adding annuities, adding a sliver of private assets will help return and stabilize returns.

Brian Sozzi: What has surprised you about markets this year?

Mike Downing: Biggest surprise in markets this year has really been, in terms of 2025, is what we're seeing is the message that we've been giving out for a little while now, which is taking advantage of the tax deferral annuities is larger group of younger buyers deciding to look at annuities and buying annuities.

Brian Sozzi: How will you looking at it over the next thing, you've been doing this for decades. I'm not calling you old. This is what you-

Mike Downing: Seasoned is what I am.

Brian Sozzi: Seasoned, yes, this is what you do. How will retirement look different in 25 years?

Mike Downing: I think the way it'll look in 25 years is I think you will cease to see a distinction between DC accumulation and spending and really see a complete integration between annuity, income protection, and defined contribution accumulation.

Brian Sozzi: Help us understand for those that are investors in Apollo, how does that relationship work with Apollo and Athene?

Mike Downing: It's a powerful relationship, right? So what Apollo brings to the table is incredible investing skill. So as an insurance company, we need safe yield. So all of our assets need to be investment grade. We need to maintain our AM best A+ rating, so we need that safe yield. Because of Apollo's massive origination between, they can generate safe yield, but can often take out the middleman. And that extra yield, that little bit of extra yield can be passed on to the customer. And it allows Athene to be able to offer, for comparative companies, 25 to 50 basis points more in return.

Brian Sozzi: There have been headwinds to this industry. And I think the company, y'all just give a presentation a couple weeks on this. You said, I believe, that the headwinds for this industry are lessening. What have been those headwinds?

Mike Downing: The headwinds historically for annuities is they've been a forgotten corner of the market. So the higher rate environment popped and reawakened the market. And what we're seeing today is an acknowledgement of the value that annuities provide. Annuities today aren't the annuities of 30 years ago, and that's why we continue to see the high demand despite the decline in rates.

Brian Sozzi: Why are annuities better than a CD?

Mike Downing: Well, simple math is if you have a CD, CDs typically roll over about 20 years. Would you rather earn 2% or 4%? On average, it's 2% more every year on an annuity versus a CD. So think about that. You're saving for 20 years. You can earn with the same amount of savings one and a half times as much money. To translate in that retirement gap, the total CD and money market's about 10 trillion. A lot of that just rolls to retirement. Let's assume that's just 20%. That's two trillion. Put that in annuities, that two trillion becomes three trillion in savings. That's a trillion dollar closure of the retirement gap, which is four trillion today.

Brian Sozzi: Lastly, Mike, the term retirement crisis gets tossed around a lot. Do you believe this country is in a retirement crisis and how would you define something like that?

Mike Downing: I would say it's in a spending crisis. There is a retirement crisis. There's a $4 trillion gap and a lot of that gap is a result of the fact that there's savings that are accumulated that haven't been reprogrammed for spending. And that's where insurance can come in. That's the value that insurance and annuities can bring is they can increase that savings that exist, and again, make your one million portfolio feel like a one and a half million dollar portfolio from a spending standpoint.

Brian Sozzi: One more. Why are you so passionate about this industry?

Mike Downing: So I've watched-

Brian Sozzi: Where did that even come from?

Mike Downing: So I've watched the decline of pensions, right? The decline of lifetime guaranteed income protection, and we have an opportunity to fix it. It's a really once in a lifetime opportunity for the insurance industry to come together and close the gap. It's capital, we have the capital, we can provide the guarantees, and a company like Athene has $35 billion of capital to really make a big dent.

Brian Sozzi: Well, good to see you again.

Mike Downing: Good to see you, Brian.

Brian Sozzi: Happy holidays. Michael Downing, Athene Co-president. Good to see you. We'll talk you soon.

Mike Downing: Good to see you, Brian.