by KYW's Salil Gutt
Inflation is back in the national consciousness. All of us have certainly noticed a sharper than usual increase in costs of gas, food and health care. Retirees, particularly those on fixed incomes, are affected a little more.
A message here is to develop a retirement income approach that marries the predictability of a monthly check along with increases to offset inflation.
The way to do this is to buy an immediate annuity with an automatic 3 to 4% increase in monthly payments every year. The downside of this approach is your initial monthly check could be about 50 to 60% of the payment without an inflation clause. However, the longer you li ve the more you will benefit from a rising payout. Studies have shown it could take about 10 years when the increasing payout annuity matches that of the fixed annuity.
One warning. There is a real possibility of much higher interest rates down the road. It may be smarter to ladder your annuity purchases over a five to ten year period to get a higher monthly payout.
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