Get inflation-protected income for life? Here’s how you can set it up.
September 18, 2024 by Mark Hulbert
Annuities are better bargains if you purchase them right before interest rates decline. But if you’re worried that inflation could climb significantly higher, they may still be a bad idea.
It’s important to point this out because of the spate of recent articles urging us to buy annuities right away, since interest rates are presumably about to drop significantly. The Advisor Perspectives website, for example, recently featured an article arguing that, because rates are headed lower, “now is the best time to act and secure elevated rates for annuities.” MarketWatch columnist Brett Arends made a similar point.
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Wink’s Moore on the Market: “Another factor that must be taken into account is that a TIPS ladder supports inflation-adjusted payouts for 30 years, but then stops. No matter how bad inflation might be over the next 30 years, a retiree who outlives those 30 years would face zero income starting in year 31.”
Ah!
But an annuity guarantees an income, for the rest of your life, no matter how long you may live!
“The bottom line, according to McQuarrie: By strategically combining an annuity with a TIPS ladder, it’s possible to construct something otherwise not available in the financial markets: An inflation-hedged life annuity.- sjm
