Inflation-Proof Your Income Stream
Inflation-indexed annuities can protect investors’ income if prices soar, says the expert, Stan “The Annuity Man."
We’re talking inflation-adjusted annuities with Stan the Annuity Man.
Well, thanks. That’s the new thing in the annuity industry. Really, up until last year, the companies, when you turn on income stream, the income stream was static. It was never going to increase. You could put a cost of living adjustment rider on an immediate annuity, but that was adjusted downward on the initial payment.
What they’ve done with some of the deferred annuities is when you turn on the income stream; it will ratchet up with CPI or will ratchet up with an index increase.
Well, that’s a great idea, because especially in lower interest rate environment that we have now, when you’re looking for that income coming out and if we have a bounceback in inflation, then this provides a great safety net.
I mean, correct. People are living longer; their dollars are going to have to spend for more. It’s going to have to increase for life.
So, these products are going to increase for as long as they live. The CPI goes up every year for 30 years, their income’s going to increase and ratchet—meaning it’s going to lock in, never going below that amount, so that they’re going to have more dollars to spend.
Now, these products are fairly new, right?
They are new. Out of about the 1,000 annuities out there that we follow—and I represent 100 companies, I’m independent—there are about four that we like.
So, four out of 1,000 have kind of figured out actuarially how to do this, how to increase your income with inflation and not plan some accounting actuarial gains.