CALL US: (888) 440-2468

CALL US: (888) 440-2468

have an annuity question?
have an annuity question?

Is inflation protection on annuity income worth the added “cost”?

Annuities can provide you with a steady stream of retirement income – and depending on the payout option you choose, this incoming cash could last for the remainder of your lifetime. But if you intend to purchase the same (or similar) goods and services, as well as have funds available for potentially high health care costs, it will be necessary for your income to increase.

How Inflation Protection Works on Annuities

One way to increase your retirement income to help keep pace with inflation is to add an inflation rider to income that you will receive from an annuity. But even though it is possible to add inflation protection on annuity income, there are some items to consider before you move forward with this strategy.

For instance, many annuity inflation riders will only increase the amount of your income by a fixed amount, such as 1% or 1.5%, as versus actually being indexed to the specific yearly inflation figure.

In addition to that, there is usually an added premium cost for inflation protection. So, you need to make sure that the extra amount of premium you’re paying will be worth it compared to the income you’ll be generating in the future.

Also, the amount of income payout from the annuity will typically start out at a lower dollar figure, as compared to income from the same annuity that doesn’t have inflation protection. With that in mind, it could take some time for you to reach the “break-even” mark.

Is an Annuity Right for Your Retirement Income Strategy?

Annuities are designed for paying out a regular stream of income for either a set time period or for the remainder of the income recipient’s life – regardless of how long that may be. These financial vehicles can help you to alleviate the worry about running out of income in retirement.

Not all annuities are the same, though, so it is important that you first discuss your short and long-term financial objectives with an advisor who specializes in these financial vehicles. An annuity specialist can also walk you through any additional information about annuities, such as whether or not adding inflation protection makes sense.

At Annuity Gator, our mission is to educate consumers and financial professionals on how annuities work, and how they may – or may not – fit into an overall retirement planning strategy.

So, if you have any questions regarding how to design the right annuity for your needs, feel free to reach out to one of our experts by calling (888) 440-2468, or by sending us an email through our secure online contact form. We look forward to hearing from you.

Is inflation protection on annuity income worth the added “cost”?

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