Inflation Risk

The risk of a decrease in future purchasing power due to rising prices. Inflation risk can impact fixed annuities that do not contain inflation protection because it erodes the future power of a stream of fixed payments. For example, a relatively modest 3% rate of inflation will reduce the purchasing power of a $3,000 monthly payment to $1,660 within 20 years.

Research Highlights Fixed SPIAs

Retirement researcher Wade Pfau published a research paper titled “An Efficient Frontier for Retirement Income .” Pfau’s paper analyzes the relative merits of equities, bonds, fixed single premium immediate annuities (SPIA), inflation -adjusted SPIAs and variable annuities with guaranteed lifetime withdrawal benefits ( GLWB ). Each of these allocation options are examined in the context of achieving retirement spending goals. Pfau creates an efficient frontier for a...

Pimco’s Gross Describes a New Age of Risk

Pacific Investment Management Company (Pimco) founder and co-chief investment officer Bill Gross offered a revised view of the global investing landscape in a letter published on the company’s website. 

As the manager of the Pimco Total Return Fund, Gross’s 2011 investment decisions were driven in part by the “new normal” thesis. 

The new normal view...

Billion Prices Project Provides Real-Time Alternative to Consumer Price Index

Anyone concerned about inflation and inflation risk should take a look at the Billion Prices Project -- a set of real-time inflation indexes that provide an important alternative to the consumer price index (CPI).

The BPP databases show prices in the United States soaring at a rate well above what is indicated by the CPI.  This decoupling has been especially...

Key Phrases Autotag: 

Guaranteed Income Solutions Take Center Stage

Putnam Investments President and CEO Robert Reynolds spoke on the need to address America’s lifetime income challenge at the recent Retirement Income Industry Association (RIIA) conference in Chicago.

While Reynolds has spent most of his career in leadership positions in the investment management industry, his...

Ten Questions to Ask When a Financial Advisor Says: "You Know I'm Not a Big Fan of Annuities"

Many financial advisors seem conditioned to wear...