Inflation

A list of ten risks faced by retirees includes the obvious such as stock market risk , but also includes issues that may not be top-of-mind for many retirees such as inflation risk and interest rate risk . Longevity risk is at the top of the list. Immediate annuities and the longevity annuity are mentioned as a potential solutions to the risk of outliving one's assets: "Given that, what's the best way to manage that risk? Social Security , traditional pensions and payout annuities all promise...

The financial crisis has resulted in renewed interest in immediate annuities which can be used to lock-in stable, guaranteed income for a lifetime. "An immediate annuity can function just like a pension , producing a predictable payout. As the "immediate' part of the name suggests, the distributions start shortly after the money is invested." Longevity risk , inflation protection, how much to annuitize , and adding annuities over time are addressed in this article. Source: Wall Street Journal...

Fidelity Investments released their annual estimate of the amount required to cover health care costs in retirement. The $240,000 estimate is for a 65 year old couple retiring in 2009. This amount is in excess of what is provided by Medicare. In other words, the $240K is for costs over and above what is covered by Medicare. The $240,000 is up 50% from 2002, highlighting the fact that retirees face vastly different rates of inflation than the rest of the population. Source: Fidelity Investments...