How worried should retirees be about future inflation?
By way of an answer, ask yourself another question: Would you be interested in an annuity that pays you 3% less each year, with the result that your annuity income in 24 years would be half what it is today? Put that way, of course, your probable answer is “of course not.”
Yet this situation I describe is not hypothetical. It is “real,” as in inflation-adjusted. If upon retiring at age 66 you purchase an immediate annuity, and inflation averages 3%, the guaranteed income stream you will be receiving at age 90 will be worth half as much.
Unless, that is, the annuity you purchase carries inflation protection, automatically increasing payouts by a cost-of-living adjustment.
Should you purchase one? Even having the option is relatively new. When I last wrote about annuities in October, for example, several of the experts I interviewed thought that inflation-indexed annuities—real annuities, as they sometimes are called—weren't available.
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