Those planning for retirement these days are confronted with many different issues that worry them. Not only do you have to establish a secure stream of income that will last you the rest of your life; you also worry whether the income you receive today will cover your expenses in ten or twenty years. Inflation, or the rise in prices of goods and services, means that someday your money won’t stretch as far as it once did.
Even though inflation occurs at a very slow rate, we all feel the effects over time. Did you notice an increase in the price of milk this past year? Maybe you noticed that a gallon now costs a few cents more than it did in 2014. Or perhaps, like most people, you didn’t notice a difference. Now ask yourself if you noticed a difference between 1985 milk prices, and milk prices in 2015. In twenty years, there has certainly been a very noticeable increase! And with many people living twenty or more years after retirement, that’s the type of price difference we can all expect from the beginning of our retirement years to the end. Ouch!
So how can senior citizens, living on a fixed income, possibly prepare for future expenses?
Remember that Social Security was intended to be a supplement to your income, but was never intended to fund your entire retirement. Luckily, the Social Security program does indeed conduct regular cost of living adjustments, which are tied to inflation. That means you can reasonably expect that some part of your income will gradually increase throughout your retirement years.
On the other hand, there will be years like this one, in which the Social Security Administration announces that there will be no cost of living adjustment (COLA) to benefit checks. And even in years when there is a COLA, the increase is relatively small. That means you should plan now, to ensure that your income gradually increases with time.
Now the good news: We can do that, with an annuity contract! Contrary to popular belief, an annuity contract doesn’t just provide you with a set income for life. We can structure your contract, using different features and riders, so that your income gradually increases over time. In this way, your annuity can keep pace with inflation, and we can preserve the purchasing power of your money.
For more information on how an annuity contract can protect your income against inflation, call our office to schedule an appointment. We will show you all of our tips and tricks to optimize an annuity contract in your favor.