Life Annuities: 3 Ways to Limit Inflation

Life annuities are types of investments that you can use to secure income during your retirement years. If you are worried about the impact of inflation on your retirement portfolio, here are a few ways to combat it.

1. Inflation-Protected Annuities

There are several lifetime annuities out there that provide protection against inflation. With this type of annuity, the amount of the annuity payment is indexed to the increase in inflation over a certain period. Typically, the company paying out the annuity will look at changes in the Consumer Price Index to determine the amount of inflation that has occurred.

2. Equity-Indexed Annuities

You might also choose to invest in an equity-indexed annuity. This type of annuity is tied to the performance of a financial index, such as the S&P 500. Traditionally, over the long-term, these indexes have outperformed the rate of inflation. This investment will not guarantee that you beat inflation, but it will give you a good chance to do so.

3. Inflation Rider

Many times, a traditional life annuity is going to offer the option to add an inflation rider. This optional add-on to your annuity will require a slightly higher premium payment. This is going to provide you long-term protection against inflation.

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