Annuities and Inflation Expectations
POSTED Wed, 08/05/2009 - 15:40 | POSTED BY Anonymous
Related Reading
- How do annuities protect against inflation?
- Inflation and Fixed Annuities
- Buffett and Pictet Express Concerns About Inflation
- Are there indexed annuities that track the CPI or other direct inflation indicator?
- What are some rules of thumb for fixed income ppl choosing between bonds and annuities with their lump sum retirement payouts?
Trending Now
Tom Cochrane's Blog
Buying Guide
Click below to browse our free annuity buying guide and learn how to choose the best annuity.
Find Products
Click below to research and compare annuity products. You may also add or edit an annuity product listing.
Find Financial Advisors
Click below to find financial advisors who provide annuities and retirement planning services. You may also add or edit a financial advisor profile.
Find Companies
Click below to find companies that provide products and services in the area of annuities and retirement planning. You may also add or edit a company listing.
tom wrote on Thu, 08/06/2009 - 11:06:
It depends on the type of annuity.
Inflation is good for the person who is paying a fixed amount. This is why inflation is good for the debtor (think mortgage owner or the government)--it reduces the real value of their debt burden. In other words, you pay back your debt in future dollars that are worth less than today.
Inflation is terrible for the receiver of a fixed payment because inflation erodes the real value of their future receipts.
As a result, a fixed annuity without inflation protection could be a real problem in a highly inflationary envronment:
http://www.annuitydigest.com/blog/tom/fixed-annuity-sales-continue-soar-...
Variable annuities may provide some relief if the subaccounts are better able to keep pace with inflation, but there are no guarantees there.
One needs to consider inflation risk in light of any living benefits purchase:
http://www.annuitydigest.com/forum/cons-guaranteed-lifetime-withdrawal-b...
Overall, inflation risk is a critical consideration with any annuity purchase--particularly as it pertains to any fixed payments that are not inflation-protected.