We would love to hear from you. Click on the ‘Contact Us’ link to the right and choose your favorite way to reach-out!

wscdsdc

media/speaking contact

Jamie Johnson

business contact

Victoria Peterson

Contact Us

855.ask.wink

Close [x]
pattern

Industry News

Categories

  • Industry Articles (21,155)
  • Industry Conferences (2)
  • Industry Job Openings (35)
  • Moore on the Market (414)
  • Negative Media (144)
  • Positive Media (73)
  • Sheryl's Articles (800)
  • Wink's Articles (353)
  • Wink's Inside Story (274)
  • Wink's Press Releases (123)
  • Blog Archives

  • March 2024
  • February 2024
  • January 2024
  • December 2023
  • November 2023
  • October 2023
  • September 2023
  • August 2023
  • July 2023
  • June 2023
  • May 2023
  • April 2023
  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • November 2010
  • October 2010
  • September 2010
  • August 2010
  • July 2010
  • June 2010
  • May 2010
  • April 2010
  • March 2010
  • February 2010
  • January 2010
  • December 2009
  • November 2009
  • October 2009
  • August 2009
  • June 2009
  • May 2009
  • April 2009
  • March 2009
  • November 2008
  • September 2008
  • May 2008
  • February 2008
  • August 2006
  • How To Evaluate Inflation-Adjusted Annuities For Your Retirement Plan

    July 19, 2017 by Bob Carlson

    A lifetime stream of guaranteed income is a goal for many people. Even better is to have that income-stream increase with inflation.

    You can have a lifetime stream of guaranteed income that increases with inflation, but you must study the options, plan, and shop carefully.

    An immediate annuity is the prime way to receive guaranteed income for life.

    The problem is it doesn’t have inflation protection.

    A separate investment portfolio can generate annual cash that supplements the annuity payments and maintains purchasing power. But there are no guarantees the investment portfolio will generate positive returns or enough cash to maintain purchasing power.

    You have two choices if you want an income guaranteed for life that increases over time: inflation-indexed annuity and variable immediate annuity. They are very different vehicles.

    An inflation-indexed annuity is a straightforward guarantee that your income payments will be adjusted for inflation (but not downward for deflation). The annuity makes periodic payments for either life or a term of years, whichever you select, and the payments are increased automatically each year to match increases in the Consumer Price Index.

    The annuities usually have a maximum one-year increase of 10%. A variation, generally called growing annuities or variable immediate annuities, allows you to select a fixed percentage amount and the payment increases each year, instead of full CPI indexing. You might select 2% or 3%, for example.

    A growing annuity should give you a higher first-year payment than a full CPI indexed annuity. Also, you’d know how much income will increase each year, and could factor that into long-term budgeting and spending, rather than having to wait to see each year’s CPI increase.

    Exclusive  U.S. Internet Sales Double Growth of Retailers in 2013

    Of course, if inflation is higher than the automatic increase rate you selected, at some point, you’d need to reduce expenses or supplement the income from another source.

    The Downside to Inflation Protection Is That It Costs You

    With an inflation-indexed annuity, your first-year payment is going to be 20% to 30% less than that of a fixed immediate annuity. The exact amount will depend on your age, life expectancy, and the inflation rates the insurer forecasts.

    Hint: You don’t necessarily want to buy the inflation-indexed annuity that offers the highest first-year payout. The insurer could be assuming future inflation will be very low or that it will earn very high investment returns. You could be hurt down the road if the insurer runs into financial trouble because its assumptions were too optimistic.

    Here’s how to compare a fixed annuity to an inflation-adjusted annuity, and compare different inflation-adjusted annuities…

    Start with the first-year monthly payment amount. Then compare what the payments would be after 10, 15, and 20 years under different scenarios.

    Assume a 70-year-old could purchase a non-indexed annuity with $500,000 and receive an initial $3,962.93 monthly payment. If he selected a 2% annual increase, the initial payment would be $3,375.54.

    After 10 years under the 2% option, the payment would be $4,736.07. If he selected full CPI indexing, the initial payment would be $3,039.18; the payment after 10 years would depend on the inflation rate and you assume different inflation scenarios to estimate future payments.

    You want to estimate how long it takes to reach the break-even point under different assumptions. That’s the point when the indexed annuity or growth annuity pays more than the fixed annuity.

    Exclusive  If You’re Not Investing, Here’s Why You Need to Pay Yourself First

    If you expect that point is within your life expectancy and can live on the lower income until then, you’re probably better off with the inflation protection.

    Keep in mind the risk that assumptions can be wrong. Bypassing the fixed annuity means taking the risk that inflation will be lower than what you or the insurer is assuming. You could end up with lower lifetime income than you assumed.

    Or you might select an annual increase without full inflation protection and take the risk that inflation will be higher than that.

    An inflation-indexed annuity usually is not sold as a separate product. Instead, you shop for an immediate annuity and select an option to have the payments adjusted for inflation, or increase automatically at your selected rate.

    If you want protection from high inflation in coming years, consider lower annuity income now in exchange for rising payments over time.

    Originally Posted at Stock Investor on July 14, 2017 by Bob Carlson.

    Categories: Industry Articles
    currency